Klarna plans more cost cuts after losses mount

Klarna Bank, months after announcing major job cuts and taking a $39-billion (€40.1 billion) hit to its valuation, is planning to restructure parts of its business further to suit a slower-growing, smaller operation, people familiar with the matter said.

In a meeting this week, a manager in the internal engineering unit of the Swedish buy-now-pay-later company told staff, 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 of 2022. While that means cuts for this 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 newly promoted chief operating officer Camilla Giesecke, who took the role in August. In a video meeting, Ms Giesecke had announced that employees who work in internal support functions would be reduced to accommodate a smaller workforce following dismissals earlier in the year, when Klarna said it would cut 10% of its approximately 7,000 employees.

“With a leaner organization to support, I have come to the conclusion that we need to restructure the COO domains to mirror the more focused nature of today’s Klarna, Ms Giesecke said, according to a memo.

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A Klarna spokesperson confirmed that Ms Giesecke was making changes in her new role and said that the company is “constantly evaluating and making adjustments to the structure of its organization. Ms Giesecke’s announcement to the “impacted teams will be followed with one-on-one conversations with managers and Klarna is looking to re-deploy people to other parts of the organization, the spokesperson said.

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

Klarna, once Europe’s most valuable startup, has been hit with expanding losses at a time when investors are becoming more skeptical of growth at the expense of profit.

When Chief Executive Officer Sebastian Siemiatkowski announced the 10% 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 slashed to $6.7 billion from $45.6 billion as part of a fundraising round.

Klarna’s losses tripled in the first half of the year. Mr Siemiatkowski has said that Klarna can’t afford to be “as forward leaning while investors are becoming more cautious on the industry, and said he aimed to bring the business back to profitability. The company’s model makes it vulnerable to rising costs that might force customers to cut spending or affect their ability to repay their loans.

Employees who lost their jobs this week were given handouts that showed what severance affected workers would be offered -- as much as six months with four months of paid notice for the longest-serving employees.

“Klarna employees move between teams and departments every week. However, the adjustments are often small in scale compared to the major change we made this spring, which was prompted by the turbulent environment, the company spokesperson said.

In the case of smaller employee reductions, the company will sometimes offer severance pay of as much as “twice the notice period, the spokesperson said. -- Bloomberg