Klarna, the buy now, pay later provider, has revealed that losses more than tripled in the first half of the year, saying it had slashed jobs and would issue smaller loans to some customers to return to profitability.
The Swedish payments company said operating losses rose to 6.2bn kronor (£499m) in the six months to June, a figure which it blamed on rapid international expansion, higher credit losses in new markets, and rising staff costs. That compared with a 1.8bn-kronor loss last year.
Founded in Stockholm in 2005, Klarna last reported a profit four years ago before embarking on a period of rapid international expansion.
However, the firm has been hit by a slowdown in consumer spending amid soaring rates of inflation, while facing a looming crackdown, including in the UK where there is currently no regulation of buy now, pay later products.
Klarna’s market valuation has suffered in recent months as a consequence, tumbling to $7bn after a fresh funding round in June. It marked an 85% drop from a peak of $46bn last year.
The company’s co-founder and chief executive, Sebastian Siemiatkowski, said its investors were now pushing for a return to profit. Backers of the company include Japan’s SoftBank, the sovereign wealth fund of the United Arab Emirates, and the Canada pension plan investment board.
“We’ve had a few years now where growth has been really heavily prioritised by investors. Now, understandably, they want to see profitability,” he said.
“We’ve had to make some tough decisions, ensuring we have the right people, in the right place, focused on business priorities that will accelerate us back to profitability while supporting consumers and retailers through a more difficult economic period. We needed to take immediate and pre-emptive action, which I think was misunderstood at the time, but now sadly we have seen many other companies follow suit.”
Klarna announced plans to cut more than 700 jobs in May, about 10% of its global workforce. “That is never easy and not a decision taken lightly,” the chief executive said.
Siemiatkowski said the firm would also issue smaller loans to some customers to tighten its approach to credit losses, given the changing economic conditions.
The company blamed a 52% rise in credit losses in the six months to June to 2.9bn Swedish kronor, compared with the same period a year earlier, on expansion into new markets.
Klarna, which is the biggest buy now, pay later provider in Britain, with 18 million customers, said its UK business was “performing strongly”, with credit losses having declined to a “historic low” of about 0.4% of purchases.