Klarna Bank AB plans to further restructure parts of its business to suit a slower-growing, smaller business, people familiar with the matter said, months after announcing major job cuts and taking a $39 billion hit to its valuation.
In a meeting this week, a manager in the internal engineering unit of the Swedish buy-now-pay-later company told employees, some of whom were about to lose their jobs, that Klarna will be less focused on growth and will have fewer employees by the end by 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 on Monday from newly promoted chief operating officer Camilla Giesecke, who took up the role in August. In a video conference, Giesecke had announced that employees working in internal support functions 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 leaner organization to support, I have come to the conclusion that we need to restructure the COO domains to reflect the more focused nature of today’s Klarna,” Giesecke said, according to a memo seen by Bloomberg.
A spokesperson for Klarna confirmed that Giesecke was making changes in his new role and said that the company is “continually evaluating and making adjustments to the structure of the organization”. Giesecke’s announcement to the “affected teams” will be followed by one-on-one talks with managers, and Klarna wants to redeploy people to other parts of the organization, the spokesperson said.
The productivity and platform manager’s follow-up presentation on Wednesday was “intended to be illustrative to help provide additional context. They do not reflect validated Klarna data, the spokesperson said. The Klarna spokesperson said the boss’s comments were “colloquial phrases” that “do not represent the wider view of the business”.
Klarna, once Europe’s most valuable start-up, has been hit by mounting losses at a time when investors are becoming more skeptical of growth at the expense of profits.
When CEO Sebastian Siemiatkowski announced the 10 percent reduction of 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 cut to $6.7 billion from $45.6 billion as part of a fundraising round.
The lender provides interest-free, short-term loans to customers who use the service to spread payments on purchases – from gas and groceries to clothing 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 has said Klarna cannot afford to be “as forward-leaning” as investors become more cautious about the industry, and said he aimed to return the business to profitability. The company’s model leaves it vulnerable to rising costs that could force customers to cut spending or affect their ability to repay their loans.
Net credit losses increased to NOK 2.85 billion in the first half of the year, up from NOK 1.85 billion a year earlier, which Klarna said was due to overall lending growth. Expenses using the company’s service are growing, and gross merchandise volume is up by 24 percent from a year earlier in the period. Klarna said it has 150 million customers in 45 markets.
Klarna staff who lost their jobs this week were given handouts showing the severance pay affected workers would be offered – as much as six months with four months’ paid notice for the longest serving employees.
“Klarna employees move between teams and departments every week. But the adjustments are often small in scale compared to the big change we made this spring, which was prompted by the turbulent environment, the company’s spokesperson said. “It’s always sad when employees leave Klarna.”
For smaller staff reductions, the company will sometimes offer severance pay of as much as “twice the notice period,” the spokesperson said.
The team leader’s presentation on Wednesday showed expectations that the Productivity and Platforms business unit, which makes internal tools for employees, would have to be scaled back to support around 6,000 by December. A company spokesperson said the fewer employees were “due to natural attrition in the business.”
A “steady-state company has a lower need for change than a hyper-growth organisation”, says the presentation.
By Agatha Cantrill
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