Klarna to cut 700 staff as valuation plunges

‘Buy now, pay later’ giant to lay off 10pc of workers as high interest rates and cost of living crisis bite

KLARNA, the “buy now, pay later” giant, will lay off hundreds of employees just days after reports that its valuation has dropped by a third.

Sebastian Siemiatkowski, Klarna’s chief executive, said yesterday that 10pc of the company’s 7,000 staff will lose their jobs.

The “buy now, pay later” sector has grown rapidly in recent years, largely as a result of its popularity among techsavvy young shoppers. However, it has been hit by the prospect of high interest rates and a cost of living crisis sweeping across Western economies.

Klarna, which allows people to pay for goods in instalments, is seeking more cash from investors according to reports at the end of last week, which said the move would cut its valuation from $46bn (£37bn) last June to about $30bn today.

Mr Siemiatkowski said in a statement to staff yesterday: “In consideration of the privacy of the people affected by these changes, we ask everyone to work from home this week.” He added: “Klarna does not exist in a bubble. When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today.

“Since then, we have seen a tragic and unnecessary war in Ukraine unfold, a shift in consumer sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession. All of which have marked the beginning of a very tumultuous year.”

Klarna is used by 150m shoppers globally, including 16m in the UK. Its success has tempted some mainstream lenders into offering similar services to their customers.

However, giving online shoppers the option to pay in instalments has come under increasing scrutiny from regulators. The UK said last year it will start regulating the interest-free “buy now, pay later” sector as its popularity soars.

This month, the Swedish Authority for Privacy Protection said it had launched an investigation into the payments firm’s checkout service.

The company raised $639m in June last year from investors including Softbank, Sequoia Capital and Permira, at the time making it more valuable than either Barclays or Lloyds.

With a mounting cost of living crisis, however, Klarna has followed the path of some of its BNPL peers.

One of its chief competitors, Affirm, which is listed on Nasdaq, has fallen around 74pc since the beginning of the year.

Meanwhile, the index as a whole is about 25pc lower so far this year.

According to Klarna’s 2021 annual report, the company posted losses of around 7.1bn Swedish kronor, or £575m, for the year ending Dec 31 2021. It is unclear whether the fintech platform has secured a new round of funding.

Executives point to strong deliverables in the company’s performance, such as a 42pc increase in gross merchandise volume last year, but increased competition from banks and an economic downturn could upset its aspirations.

“Klarna continues to hold a strong position in the market”, said Mr Siemiatkowski.

“We have a diversified business that distinguishes us from the competition.

“Therefore I do remain relentlessly optimistic about Klarna’s future, despite what we now need to go through.”