As the world population is restricted to the walls of their homes due to the outbreak of the coronavirus pandemic (Covid-19), technology has turned out be a saviour for businesses that have been able to reach the consumers online and e-commerce companies, online retailers and financial technology (fintech) businesses have primarily facilitated this provision of essential products and services to consumers amid quarantine.
Notwithstanding the volatility and unprecedented market conditions over the last few weeks, Afterpay Limited (ASX:APT), the leader in “Buy Now, Pay Later” payments space, recently announced that the Company’s active shoppers using the service at Afterpay merchant partners in the United States has crossed five million.
APT stock was trading 2.068% higher at $ 44.91 (at AEST 12:00 PM) on 22 May 2020. APT continues to perform well owing to the nature of its business and global presence of its services. The stock has generated one-month return of 61.05%, three-month return of 12.85%, six-month return of 44.74% and 43.65% Year-to-date.
Active Shoppers Using Afterpay Skyrocket In The US
In the United States, around nine million consumers have now joined the Afterpay platform, including over one million new users having actively used the platform in the last ten weeks, representing a 30-40% improvement in the weekly run rate from onset of the year (January and February 2020). These milestones have added to Afterpay’s business momentum in the US, where the Company debuted just two years ago, and now it is one of the fastest growing ecommerce payment companies in the payment market space.
More than 15,000 brands such as, but not limited to, Birkenstock, Furla, Herschel, Lancer Skincare, Marc Jacobs Beauty, A.L.C., AE/Aerie, American Eagle, Perricone MD, Soko Glam and The Hut Group, Tilly’s, YSL Beauty and others are offering, or in the process of launching Afterpay as a payment option to their customers.
In the year to date, Afterpay’s merchants have processed nearly $ 2.4 billion during Q3 FY20 ending 31 March 2020, indicating a 354% increase over the prior corresponding period in FY19. Subsequently, Afterpay had as high as 15 million app and site visits in April 2020, and the Company’s US Shop Directory contributed ~10 million lead referrals to its retail partners.
Co-founder and US CEO of Afterpay, Nick Molnar commented on this recent milestone and stated that at a time when ecommerce is being used as the primary medium to shop, there has been a growing interest and demand among consumers to pay for things that they require over time using their own money instead of resorting to loans with the burden of interest, fees or revolving debt.
He also added that the Company is grateful and committed to partner with the merchant community to support their shoppers and onboard more customers, as commerce and retail starts to rebound as things get back to normal.
Afterpay is used by a range of consumers from youngsters with no credit cards and retailers of all kinds around the world in Australia, New Zealand, the US and the UK, with its mission to become the world’s most loved way to pay. The Company is preparing to expand into Canada with the timing of the entry yet to be confirmed.
Buy Now, Pay Later Pioneer Transforming Payments Space
Through integration of Afterpay as a payment option, the merchants feel empowered to enable their customers receive the desired products immediately without having to pay upfront. The bill is allowed to be paid in four simple instalments over a short period of time and the service is completely free for customers who pay on time. This ensures that customers spend money in a responsible manner without taking on any interest payments, fee or any revolving /extended debt associate with their purchases. Around 85% of Afterpay transactions are executed using debit cards.
At the same time, Afterpay enables merchants to be more flexible with the consumers and their purchasing power, reducing friction in the shopping experience, which ultimately propels higher sales and attracts new customers to their business. On average, merchants have reported that customer conversion rates increase by over 20% and average order values improve by more than 25% when compared to other payment methods.
Due to attractive business model characteristics, Afterpay recently announced Hong Kong Stock Exchange-listed Tencent Holdings Limited as a substantial shareholder in the Company, after Tencent lodged a notice of initial substantial holder on the ASX on 1 May 2020. According to internet value added services and communication platforms provider Tencent Holdings, Afterpay’s unique customer centric, interest free approach and services are well-aligned with the changing consumer trends globally, as well as its integrated retail presence and the capacity to add significant value for its merchant partners is quite impressive.
Robust Response Plan to Covid-19
To address the challenges presented by the recent Covid-19 situation throughout the third quarter of the financial year 2020, Afterpay acted quickly to implement the first phase of a Response Plan, including protecting people and strong relationships with customers and merchants, limiting losses, preserving margins and protecting its strong balance sheet, to manage the business through this evolving cycle.
The Company continues to record strong performance across the business with underlying sales at $ 7.3 billion year to date (14 April 2020), increasing 105% compared to the prior corresponding period (pcp). In fact, March 2020 proved to be the Group’s third largest underlying sales month on record, behind the seasonally higher months of November and December 2020.
Afterpay closed the quarter ending 31 March 2020, with $ 541.1 million of cash and $ 719.2 million of total liquidity, higher than the last reported results for H1 FY20, demonstrating a strong balance sheet and liquidity position implying no requirement to raise capital in the foreseeable future.
(NOTE: Currency is reported in Australian Dollar unless stated otherwise)