Afterpay more than doubles first quarter sales

Afterpay added 1.3 million new customers in the first quarter, as underlying sales soared 115pc to $4.1bn.

Anthony Eisen and Nick Molnar from buy now, pay later Afterpay.

Afterpay shares skipped over the $100 mark after the company revealed it had more than doubled its underlying sales in the first quarter, hitting a fresh record as its active customers topped 11 million, with US consumers flocking to the “buy now, pay later” operator.

Defaults over the three months to September 30, meanwhile, were “below historical rates” in all regions, Afterpay said in a trading update.

Shares in Afterpay closed 7.3 per cent higher at $102.97.

Underlying sales — retail sales processed through its platform — surged 115 per cent to $4.1bn, up from the $1.9bn it reported in the prior corresponding period. Underlying sales were also 9 per cent higher than the record it hit in the fourth quarter of 2020.

Active customers jumped 98 per cent to 11.2 million, up from 5.7 million the prior year, with US customer numbers topping 6.5 million.

Like-for-like sales growth was driven by millennials, which accounted for 45 per cent of the increase, followed by Gen X and Gen Z at 25 per cent and 24 per cent respectively, Afterpay said.

Low default rates saw its net transaction loss as a percentage of underlying sales remain low, it said. Afterpay calculates the net transaction loss by subtracting late fees from gross losses. In the 2020 financial year, the measure as a percentage of underlying sales sat steady at 0.4 per cent.

UBS analyst Tom Beadle said underlying sales were tracking ahead of the broker’s estimates, driven by better-than-expected growth in Australia, while customer growth was in line with what it had expected.

Underlying sales in Australia and New Zealand increased 63 per cent over the quarter, with momentum building for both online and in-store sales, Afterpay said.

Sales growth in small and ­medium businesses was even higher, up 79 per cent, as customers chose to shop at local stores during the pandemic.

In-store sales represented about 20 per cent of total underlying sales in the region over the quarter. This was despite Victoria’s stage-four lockdown during the period.

“Higher than forecast transaction frequency in Australia and New Zealand has Afterpay tracking ahead of UBS underlying sales forecasts in the first half, given transaction frequency in the seasonally strong December quarter should increase,” Mr Beadle said.

UBS is forecasting group underlying sales of $8.3bn over the half, meaning second-quarter sales need only stay flat on the first quarter to meet its estimates.

The Australian and New Zealand performance also overshot Citi’s estimates, but US customer growth came in lower than ­expected.

About 12,500 new customers in the US joined the platform per day during the quarter, Afterpay said. In October to date the average has increased further to more than 15,000 new customers per day.

“Active customers of 11.2 million were lower than Citi estimates of 11.4 million. US customer net adds of 1.3 million was lower than the 1.5 million added in the fourth quarter of 2020,” Citi analyst Siraj Ahmed said.

Underlying sales in the US, meanwhile, rocketed 229 per cent compared to the prior corresponding period.

Sales growth quarter-on-quarter was negatively affected by a stronger dollar, but on a local currency basis it posted double-digit percentage growth.

Afterpay said the acquisition of Pagantis, which will give it a licence to operate in Spain, France, Italy and Portugal, was progressing well and on track for completion by the end of the year. The acquisition still requires regulatory approval by the Bank of Spain.

Its plans for savings accounts and cashflow tools for customers were under way as part of its new money management services, it said, with a product launch expected in Australia by the end of the ­financial year.

While investors have jumped onto Afterpay this year, pushing its share price from $8 in March to the current price of than $100, analysts have cautioned that regulators could extend surcharging rules currently applicable to payment methods including credit cards to BNPL providers such as Afterpay.

They say that could undermine Afterpay’s model, which charges merchants for the service and prevents them from passing the cost on to consumers.