Zip Co chief executive Larry Diamond is seeking to reassure the market as the company’s share price continues to plunge, arguing the buy now, pay later operator’s business will be resilient in a tougher backdrop of rising inflation.
Zip Co, the key local rival to Afterpay, has suffered a dramatic fall in its share price this year, as investors have fretted over rising bad debts and mounting competitive pressure, alongside a wider sell-off in loss-making technology companies.
As the share price fell another 11 per cent on Wednesday, closing at a multi-year low of 46¢, Zip released a statement highlighting a previously flagged plan to cut costs and potentially rein in its global expansion, as it tries to reach profitability during the 2024 financial year.
The company also said non-executive director and chair of the audit and risk committee Pippa Downes, who joined the board in October 2020, was stepping down from the board.
Despite market fears the company could face rising bad debts as interest rates increase, Zip said it was “well-placed” to deal with rising interest rates in the US, and Diamond reiterated it was focusing on moving to profitability.
“In an environment where wage growth is falling behind heightened inflationary pressures, affordability becomes even more important priority for consumers as they budget each month,” he said.
“We believe our business model will stand up exceptionally well in such an environment as we continue to provide significant value and benefit to our customers and, importantly, our merchant partners seeking to drive continued growth.”
Zip and other buy now, pay later (BNPL) operators provide interest-free installation loans, which compete with traditional credit cards. The sector enjoyed a surge during the pandemic as interest rates plunged to near zero and online shopping boomed, with Zip’s share price briefly exceeding $12 early last year.