Klarna Bank AB, months after announcing major job cuts and a $39 billion hit to its valuation, plans to further restructure parts of its business to fit a slower-growing, smaller business, people familiar with the matter said.
At a meeting this week, a manager in the Swedish buy-now-pay-later company’s internal engineering unit told staff, some of whom were set to lose their jobs, that Klarna would be less focused on growth and have fewer employees by the end of 2022. While that means cuts for that unit and others, the productivity and platforms business will still need to “keep the lights on,” according to a presentation seen by Bloomberg.
The presentation followed comments on Monday from recently promoted chief executive Camilla Giesecke, who took up the role in August. In a video conference, Giesecke had announced that employees working in internal support services would be reduced to accommodate a smaller workforce following layoffs earlier this year when Klarna said it would cut 10 percent of its roughly 7,000 employees.
“With a more agile organization to support, I concluded that we needed to restructure the COO areas to reflect the more focused nature of today’s Klarna,” Giesecke said, according to a memo seen by Bloomberg.
A Klarna spokesperson confirmed Giesecke was making changes in her new role and said the company is “constantly evaluating and making adjustments to its organizational structure.” Giesecke’s announcement to “affected groups” will be followed by one-on-one talks with managers, and Klarna is trying to redeploy people elsewhere in the organization, the spokesman said.
The productivity and platforms manager’s subsequent presentation on Wednesday “was intended to be indicative to help provide further context. They do not reflect validated Klarna data,” the spokesperson said. A Klarna spokesman said the manager’s comments were “colloquial phrases” that “do not represent the wider views of the business”.
Klarna, once Europe’s most valuable start-up, has been hit by mounting losses at a time when investors are increasingly wary of growth at the expense of profits.
When CEO Sebastian Siemiatkowski announced the 10% layoff in May, he told employees that “Klarna does not exist in a bubble.” The war in Ukraine, inflationary pressures and the prospect of recession in many of its markets had prompted the company to cut costs. Two months later, Klarna’s valuation fell to $6.7 billion from $45.6 billion as part of a fundraising round.
The lender makes interest-free, short-term loans to customers who use the service to spread payments on purchases — from gas and groceries to clothes and electronics — over several months. It collects fees from its retail partners, including brands such as Nike, H&M and Samsung.
Klarna’s losses tripled in the first half of the year. Siemiatkowski said Klarna could not afford to be “the same forward-looking” while investors are becoming more cautious in the industry and said his goal is to return the business to profitability. The company’s model makes it vulnerable to rising costs that could force customers to cut back on spending or affect their ability to repay their loans.
Net credit losses rose to 2.85 billion kroner in the first half, from 1.85 billion kroner a year earlier, which Klarna said was driven by overall loan growth. Spending on the company’s service usage is expanding, with gross merchandise volume up 24 percent over the year-ago period. Klarna said it has 150 million customers in 45 markets.
Klarna employees who lost their jobs this week were given leaflets showing the redundancy that would be offered to affected workers – up to six months with four months’ notice for longer-serving employees.
“Klarna employees move between teams and departments every week. However, the adjustments are often small-scale compared to the significant change we made this spring, which was prompted by the turbulent environment,” said the company spokesperson. “It’s always sad when employees leave Klarna.”
In the case of smaller redundancies, the company will sometimes offer severance pay of up to “double the notice period,” the spokesman said.
The team chief’s presentation on Wednesday showed expectations that the productivity and platforms business unit, which makes internal tools for workers, should be reduced to support about 6,000 by December. A company spokesman said the fewer staff were due to “natural turnover within the business”.
A “steady-state company has a lower demand for change than an overgrowth organization,” the presentation said.
By Agatha Cantrill
Klarna is discussing a valuation cut to $6 billion from $45.6 billion
Valuation discussions for the Swedish lender remain in flux and the level is likely to approach $10 billion, according to people with knowledge of the matter.