Klarna slashes half-year loss by 67%

by The Insights

Klarna, the Swedish buy now, pay later juggernaut, is on a mission to trim its losses and expand in European markets. In the first half of this year, it made significant strides, but profit remained just out of reach.

As of Thursday, Klarna reported an operating loss of approximately $185 million for the first six months of this year, marking a 67% drop compared to the same period last year. The last time it saw a half-year profit was in the second half of 2018, the company told Fortune

Klarna did manage to turn a profit in the second quarter, achieving this milestone ahead of its internal targets. Its revenue for the second quarter also saw a robust 17% year-over-year increase.

Klarna’s CEO, Sebastian Siemiatkowski, had announced last November that the company aimed to start posting monthly profits by this summer. While it fell slightly short of this goal, Siemiatkowski still sees reason to celebrate.

“Today’s results clearly rebut the misconceptions around Klarna’s business model, evidencing that it is incredibly agile and sustainable as we support our healthy consumer base in making sound financial decisions,” he said in a statement. 

The fintech giant said in May that it was on track to reach profitability on a monthly basis during the second half of 2023.

Klarna’s hopes of profitability and Europe boom

Apps like Klarna allow consumers to make purchases and pay for them in interest-free installments.

The company consistently recorded profits since it was founded in 2005 up until 2018, when it started investing in its U.S. growth.

American consumers, who’ve especially boosted Klarna’s business through the COVID-19 pandemic, have made it among the top BNPL apps in the country. 

At its peak, the company was valued at $45.6 billion in 2021, but economic volatility and a tech rout plundered its valuation by 85% just a year later.

Klarna, like other fintech companies, has also faced the brunt of surging costs, rising interest rates and softer consumer spending across the world. 

But Klarna has weathered the storm by undertaking cost-cutting measures, including laying off 10% of its workforce last year.

It has also adopted artificial intelligence to help improve the efficiency of its business and offer tailor-made purchase recommendations to customers.

In recent months, the Swedish company is starting to see growth in other geographies outside the U.S., which still remains its biggest market.

Last week, Klarna said it was “doubling down” on its presence in Europe after seeing a 26% growth in the U.K. and 14% growth across all parts of the continent.

The company told Fortune that greater access to credit, fewer competitors and new partnerships helped it gain traction and see “phenomenal growth” in European markets.

Klarna plans to make its IPO debut when “market conditions” improve, Siemiatkowski told the Financial Times in a Thursday interview

Editor’s Note: This article has been updated to clarify references of Klarna’s profit target.

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