BNPL giant Klarna saw its net losses nearly quadruple in the first half of 2022 driven by higher credit defaults, increased employee costs and a shift in investor sentiment
Swedish fintech giant Klarna has reported disappointing financial results for H1 2022. On one hand, the H1 revenue was $950 million, up 24% on H1 2021, driven largely by growth in the US. However, net losses for the same period were $581 million, compared to $141 million the previous year.
In a letter to shareholders, CEO Sebastian Siemiatkowski says that when the company set their business plans for 2022, it was a very different world than the one we are in today. The tragic and unnecessary war in Ukraine, a steep increase in inflation, a highly volatile stock market and a likely recession brought up a huge shift in investor sentiment. Previously, they estimated future possibilities of the business and prioritized growth. Today, investors want profitability.
Besides, Klarna’s losses were aggravated by rising defaults on borrowing and the cost of integrating the recently acquired price comparison site PriceRunner. Employee costs increased as well. In May, the company said it would cut 10% of staff but the move hasn’t yet brought visible positive effects.
Klarna benefited from the BNPL rise during the pandemic, hitting a $46 billion valuation last summer. Yet, this year the company raised funds at a much reduced $6.7bn post-money valuation.