Klarna Bank AB, months after announcing major job cuts and missing its $39 billion valuation, plans to further restructure parts of its business to fit a slower-growing and smaller operation, people familiar with the matter said. .
At a meeting this week, the manager of the Swedish buy-now-pay-later company’s in-house engineering division told employees, 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. Despite what that means is spending cuts at that division and others, the performance and platforms business will still need to “keep the lights on,” according to a presentation read by Bloomberg.
The presentation followed comments on Monday from newly promoted chief operating officer Camilla Giesecke, who took up the role in August. In a video conference, Gieseke announced that back-office support staff would be cut to accommodate a smaller workforce following layoffs earlier this year when Klarna said it would cut 10 percent of its roughly 7,000 employees.
“I have come to the conclusion that I support a more compact organization to reflect the more focused nature of today’s Klarna,” Gieseke said, according to a memo seen by Bloomberg.
A Klarna spokesperson confirmed that Giesecke is making changes to his new role and said the company is “constantly evaluating and making adjustments to its organizational structure.” Following Gieseke’s announcement, “affected teams” will have face-to-face interviews with managers, and Klarna plans to transfer people to other parts of the organization, the spokesperson said.
The performance and platforms manager’s following presentation on Wednesday was “intended to be illustrative to help provide additional context. They do not reflect Klarna’s verified data,” the spokesperson said. A Klarna spokesman said the manager’s comments were “colloquial phrases” that “do not reflect the wider views of the business”.
Klarna, once Europe’s most valuable startup, has been hit by losses that are mounting at a time when investors are increasingly skeptical of growth at the expense of profits.
When chief executive Sebastian Siemiatkowski announced 10 percent layoffs in May, he told employees that “Klarna doesn’t exist in a bubble.” The war in Ukraine, inflationary pressures and the prospect of recession in many of its markets have prompted the company to cut costs. Two months later, Klarna’s valuation was cut to $6.7 billion from $45.6 billion in 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 “leaning forward” while investors are becoming more cautious in the industry, and said he was committed to returning the business to profitability. The company’s model leaves it vulnerable to rising costs that could force customers to cut back on spending or affect their ability to repay loans.
Net loan losses rose to 2.85 billion kroner in the first half of the year from 1.85 billion kroner a year earlier, which Klarna said was due to overall loan growth. Expenses for the use of the company’s services are increasing, the gross volume of goods increased by 24 percent compared to last year during this period. Klarna said it has 150 million customers in 45 markets.
Klarna staff who lost their jobs this week were given handouts outlining how much help would be offered to workers affected by the redundancies – up to six months with four months’ paid notice for longest-serving staff.
“Every week, Klarna employees move between teams and departments. However, the adjustments are often small in scale compared to the major changes we made this spring, which were driven by the turbulent environment,” a company spokesperson said. “It’s always sad when employees leave Klarna.”
For smaller layoffs, the company will sometimes offer severance pay of “double the notice period,” the spokesman said.
The team leader’s presentation on Wednesday showed an expectation that the productivity and platforms business unit, which builds internal tools for employees, should be cut to support about 6,000 by December. A company spokesman said the reduction in staff was “due to the natural outflow of business”.
“A company in a stable state has less demand for change than a growing organization,” the presentation said.
By Agatha Cantrill
Discussions about the Swedish lender’s valuation continue, and the level could possibly approach $10 billion, according to people familiar with the matter.
https://www.businessoffashion.com/news/retail/klarna-plans-to-cut-staff-growth-plans-after-losses-mount/ Klarna plans layoffs, plans growth after mounting losses