Klarna Shifts Game Plan to Profits Over Growth

Buy now pay later (BNPL) pioneer and digital bank Klarna is shifting its focus from growth to short-term profits after net losses in 2021 hit approximately $689 million.

While aiming to raise capital after cutting 10% of its workforce, Klarna CEO Sebastian Siemiatkowski told Financial Times he didn’t think the funding would necessarily be at a valuation below its current $46 billion, which is the highest in Europe for a private technology firm.

See also: Klarna to Cut About 700 Jobs Due to Inflation, War

Klarna laid off 10% of its staff  — roughly 700 people — due to the effects of inflation and the Russia-Ukraine war. 

“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,” Siemiatkowski said in a video statement. “Since then, we have seen a tragic and unnecessary war in Ukraine unfold, a shift in consumer sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession.”

Siemiatkowski told FT that Klarna will concentrate on “short-term profitability over long-term new, potential investments.” 

Read more: Klarna Eyes Fresh Capital at Reduced Valuation

Headquartered in Stockholm, Klarna was founded in 2005 to make it easier for people to shop online, and has 147 million active consumers across more than 400,000 merchants in 45 countries, according to its website. 

Recent IPOs in the FinTech space have faltered, and one of Klarna’s chief rivals, Affirm, which went public in January 2021, has seen an 86% drop in share price since November.

Siemiatkowski told FT that he and  Klarna chair Sir Michael Moritz, partner at venture capital firm Sequoia Capital, are “very committed to the idea that there is a benefit of being private, and the last 12 months have proved us right.”

Overall, however, Siemiatkowski said the company won’t completely pivot from growth in favor of profits.

“We don’t think that’s right. The long-term target of Klarna, which is to really disrupt retail banking and payments and financial services — very similar to the situation of Amazon a decade earlier — we think the opportunity is as alive as it was six months ago. So it’s not that the goal has changed, it’s just the path there may be affected and has to change.”