What’s going on?
Buy-now-pay-later (BNPL) firm Klarna is still shedding cash, but it said on Wednesday that it’s getting closer to turning a profit.
What does this mean?
Klarna was the darling of Europe’s tech startup space not long ago, showered with praise and funding alike – but how the mighty have fallen. The global economy’s hit a rut now, and capricious investors have fixed their attention on companies that can actually turn a profit. And Klarna doesn’t, which could be why the firm’s valuation plunged from $46 billion to $7 billion in July. Since then, Klarna’s been proving skeptics right, racking up a $200 million loss last quarter, twice the sum at the same time last year. Now, though, Klarna’s determined to turn things around: the firm bid farewell to 10% of its staff back in May, and it’s tightening up the conditions of the loans it offers. With a little luck, it’s hoping those moves will see it turning a profit again within a year.
Why should I care?
Zooming in: Grand ambitions.
Cutting costs is just one way Klarna’s trying to make up ground. The other is by tapping into revenue streams beyond the BNPL space it sprang from. Case in point: the firm recently rolled out a new price-comparison tool, built on its $1 billion purchase of PriceRunner last year. That’s one step in the firm’s plans to turn Klarna into a one-stop-shop for online bargains, rivaling similar services offered by Google and Amazon.
Zooming out: Inflation steps off the gas.
Inflation has doled out nothing but suffering to most firms, but it’s probably been kind enough to Klarna: after all, quick online loans can be handy for hard-up shoppers waiting on their next paycheck. But now there are signs that inflation’s easing in Europe, falling to a lower-than-expected 10% in November versus the same time last year – the first time the metric’s decreased in a full 17 months.
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Originally Posted November 30, 2022 – Klarna’s Cutting Down
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