Losses at Klarna quadruple as costs rise and credit losses grow

Net losses at Swedish payments provider Klarna quadrupled in a bruising first half during which the valuation of Europe’s one-time most valuable private tech plummeted.

The payments company on Wednesday reported a net loss of SKr6.2bn ($581mn) for the first half of 2022, compared with SKr1.4bn a year earlier.

It attributed the deepening losses to higher staff costs, investments in integrating newly acquired Swedish price comparison service PriceRunner and rising credit losses. It blamed the higher credit losses on the challenges of underwriting new customers with limited credit histories.

Revenues increased 24 per cent year on year to SKr9.1bn, driven by growth in markets including the US, where Klarna has built up 30mn users — a fifth of its global total. It has also expanded into new countries including the Czech Republic, Canada and Greece.

“Klarna has been operating in a very different environment in the first half of 2022,” said Sebastian Siemiatkowski, chief executive and co-founder. “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.”

Klarna’s struggles reflect challenges facing the wider buy now, pay later sector, as lower consumer spending and greater regulatory scrutiny hit the popular credit products, which allow consumers to defer or divide payments into instalments.

After several attempts to raise cash at higher valuations failed, the value of Klarna’s shares slumped in July to $7bn after it raised $800mn from investors including Sequoia and Mubadala, the Abu Dhabi sovereign wealth fund.

Klarna secured a valuation of $46bn as recently as June last year, following a $639mn funding round led by Japan’s SoftBank, the investment group behind a disastrous bet in office-sharing group WeWork.

The company slashed its workforce by 10 per cent in May as Siemiatkowski said it would focus on “short-term profitability”. Klarna has not been profitable since 2019.