Block shares crunched on concerns about spending

afr.com:

The shares of Afterpay’s parent company, Block, tumbled by 10 per cent on Friday despite second quarter earnings beating forecasts and a stronger outlook, with the company calling out Australian spending as being more challenged than the United States.

Block head Jack Dorsey said connecting its US Cash App with the users of Square’s payment terminals through Afterpay was a key priority, as Block tries to extract value from its all-scrip acquisition of the buy now, pay later provider in August 2021.

“This is where a lot of my focus is right now,” Mr Dorsey said on a second quarter earnings call. “I’m meeting the team almost on a daily basis to make sure that we come up with a compelling and differentiated experience.”

BNPL is facing pressures in Europe, with Block saying it had wound down Afterpay’s Clearpay subsidiary in France, Spain and Italy.

“These markets have not seen the growth and profitability we had expected over the past several years,” Mr Dorsey said. “We see an opportunity to shift these resources towards strategic areas that have a higher potential return on investment.”

Still, in the US, BNPL is expected to grow at similar rates next quarter, after sales at Afterpay lifted by 22 per cent over the second quarter to $US6.4 billion ($9.7 billion), better than its growth of 17 per cent in the first quarter. Losses at Afterpay were 1.01 per cent of sales, “relatively consistent” with prior periods.

Spending in Australia appears softer than in the US, CFO Amrita Ahuja told a call with analysts and investors. “What we’ve seen is international markets have continued to see some of those macro related headwinds, which are more pronounced in Australia in the second quarter, albeit with overall growth from BNPL,” she