Klarna plans to cut staff, growth plans after loss rises

Klarna plans to cut staff, growth plans after loss rises

Klarna Bank AB, months after announcing major job cuts and taking a $39 billion hit to its valuation, plans to further restructure parts of its business to fit a smaller, slower-growing operation, people familiar with the matter said. the case.

At a meeting this week, a manager in the Swedish company’s internal engineering unit buy now pay later told staff, some of whom were about to lose their jobs, that Klarna will be less focused on growth and have fewer employees. by the end of 2022. While that means cuts for this unit and others, the productivity and platform business will still need to “keep the lights on,” according to a presentation seen by Bloomberg.

The presentation followed comments Monday from newly promoted chief operating officer Camilla Giesecke, who took over the role in August. In a video meeting, Giesecke had announced that employees working in internal support roles would be reduced to accommodate a smaller workforce following layoffs earlier in the year, when Klarna said it would cut 10 percent of its roughly 7,000 employees. employees.

“With a more agile organization to support, I have come to the conclusion that we need to restructure the COO domains to reflect the more focused nature of Klarna today,” Giesecke said, according to a memo seen by Bloomberg.

A Klarna spokesman confirmed Giesecke was making changes to his new role, saying the company is “constantly evaluating and making adjustments to the structure of its organization.” Giesecke’s announcement to “affected teams” will be followed by one-on-one discussions with managers and Klarna is looking to redeploy people to other parts of the organization, the spokesman said.

The platform and productivity manager follow-up presentation on Wednesday “was intended to be illustrative to help provide more context. They do not reflect validated Klarna data,” the spokesperson said. The Klarna spokesman said the manager’s comments were “colloquial phrases” that “do not represent the broader views of the business.”

Klarna, once Europe’s most valuable startup, has been hit by mounting losses at a time when investors are becoming more skeptical about growth at the expense of profits.

When CEO Sebastian Siemiatkowski announced the 10 percent reduction in workers in May, he told employees that “Klarna does not exist in a bubble.” The war in Ukraine, inflationary pressures and the prospect of a recession in many of its markets had pushed the company to cut costs. Two months later, Klarna’s valuation was lowered to $6.7 billion from $45.6 billion as part of a fundraising round.

The lender provides short-term, interest-free loans to customers who use the service to spread payments for purchases, from gas and groceries to clothing and electronics, over several months. It collects fees from its retail partners, including brands like Nike, H&M, and Samsung.

Klarna’s losses tripled in the first half of the year. Siemiatkowski has said that Klarna cannot afford to be “so forward-thinking” as investors become more wary of the industry, and said his goal is to return the business to profitability. The company’s model leaves it vulnerable to rising costs that could force clients to cut back on spending or affect their ability to repay their loans.

Net credit losses rose to 2.85 billion kroons in the first half, up from 1.85 billion kroons a year earlier, which Klarna said was due to overall loan growth. Spending on company service usage is on the rise, with gross merchandise volume up 24 percent from a year earlier in the period. Klarna said it has 150 million customers in 45 markets.

Klarna employees who lost their jobs this week received brochures showing what compensation would be offered to affected workers: up to six months with four months’ paid notice for long-serving employees.

“Klarna employees move between teams and departments every week. However, the adjustments are typically small in scale compared to the major change we made this spring, which was prompted by the turbulent environment,” the company spokesperson said. “It’s always sad when employees leave Klarna.”

For smaller employee reductions, the company sometimes offers severance pay of up to “double the notice period,” the spokesman said.

The team leader’s presentation on Wednesday showed expectations that the productivity and platforms business unit, which makes in-house tools for employees, would have to shrink to support around 6,000 by December. A company spokesman said the lower number of staff was due “to natural turnover within the business.”

A “steady-state company has lower demand for change than a hyper-growth organization,” the presentation said.

By Agatha Cantrill

Learn more:

Klarna Discusses Reducing Valuation To $6 Billion From $45.6 Billion

The Swedish lender’s valuation discussions continue to shift and the level may be closer to $10bn, according to people with knowledge of the matter.

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