// Klarna saw losses more than quadruple amid slowing sales and rising inflation
// Buy now, pay later sector also braced for financial regulations as credit concerns increase
Buy now, pay later (BNPL) giant Klarna saw losses more than quadruple to £502 million in the first six months of this year amid a consumer slowdown.
The Swedish company, which at one time was Europe’s most valuable private tech firm, reported the huge loss for the first half of 2022, compared with a £114 million loss in the same period last year.
This despite a 21% rise in the amount of goods it helped to sell by offering its credit service to £35 billion, while revenues jumped 24% to £816 million.
Founded in Stockholm in 2005, Klarna is the world’s biggest provider of BNPL credit and serves 15 million customers in the UK and 150 million worldwide.
It attributed the results to higher credit losses in new markets and a rise in employee costs, having last reported a profit four years ago, ahead of rapid international expansion.
A slowdown in consumer spending amid soaring inflation, plus a looming financial authority crackdown in the UK where there is currently no regulation of BNPL products, have hit results.
READ MORE: Klarna valuation plummets by 85% as investors lose appetite for BNPL
“Klarna has been operating in a very different environment in the first half of 2022…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,” said CEO Sebastian Siemiatkowski.
He added that the firm would in future focus on ways to “accelerate us back to profitability”, including lending “a little less” to new customers in order to cut the group’s credit losses from those who found themselves unable to repay their borrowings.
The company’s products allow people to defer payments in three instalments and are popular with younger consumers especially.
Klarna was valued at £39.2 billion in a funding round in June last year but was caught in a technology stocks sell-off earlier this year, amid market panic about their growth prospects, which has sent its value tumbling.
As a result, last month Klarna struggled to raise additional cash at its high valuation, and eventually attracted £687million from investors but at a much-reduced value of £6 billion.
Neil Wilson, analyst at Markets, told This is Money: “The tech bubble has popped. Investor patience for companies like Klarna is running thin and there are questions over the business model. What happens if the regulators crack down next year?’ Britain’s Financial Conduct Authority has been damning about the sector and Klarna.”
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