Klarna says it has made progress towards profits as losses double

Klarna said it has made “huge progress” towards profitability even as losses at the once high-flying Swedish payments group ballooned in the third quarter.

“Klarna has made huge progress on our path to profitability, which we expect to hit on a monthly basis in the second half of 2023,” chief executive Sebastian Siemiatkowski said on Wednesday.

The forecast came as the company reported a net loss of SKr2.1bn ($200mn) for the latest three-month period compared with SKr1.1bn a year earlier.

The group has aggressively cut costs as a slowing global economy and a downturn in financial markets ratchets up the pressure on Klarna to turn a profit. The group cut 10 per cent of its staff in May.

Klarna’s valuation slumped from $46bn in June to just under $7bn following an $800mn funding round in July. At its half-year results in August, Klarna said it would look at tightening lending, especially to new customers, in a bid to staunch losses.

Klarna has been one of the pioneers in the buy now, pay later sector, which allows consumers to defer payments or make their payments in instalments.

While the products are highly popular among younger customers, a combination of worsening economic conditions, growing scrutiny from regulators and competition from lenders and Big Tech companies have posed a challenge to the sector’s business model.