Afterpay has Black Friday boom as US sales overtake Australia

Afterpay said in a trading update released on Wednesday night it had recorded its largest ever amount of sales on a single day on November 27, known as Black Friday. On that day, it sent 1.2 million customer referrals to US merchants from its shop directory, while the size of customer orders was 30 per cent higher compared with last year.

For the month of November, $1 billion of sales in the US were made using Afterpay, compared to $1.6 billion for the three months of July to September and $300 million in November last year.

'Strong pipeline' of new merchants

Sales in Australia were $900 million in November, compared with $2.2 billion in the first quarter, with $200 million in Britain bringing the total underlying sales in November to $2.1 billion, more than double the $1 billion made over the same month in 2019 and beating analyst forecasts.

Analysts had been expecting total sales of about $5.7 billion for the October to December quarter, but these could be upgraded after the November beat.

Morgan Stanley analyst Andrei Stadnik said November sales were elevated because Cyber Monday, another large online sales day following Black Friday, landed in November this year.

"It is also possible that November is seasonally the strongest month of the year and October sales data has not been disclosed," he said. "So while we expect consensus upgrades, we don’t think they will be as large as the headline beat."

Mr Molnar pointed to the sign-up of US retailer Bed Bath & Beyond, and turning on in-store with Dick's Sporting Goods, after other large US fashion retailers like Gap switched on the service, and a deal with payments processor Stripe allowed more merchants to accept it. Afterpay said on Wednesday there is a "strong pipeline" of new merchants in the US "preparing to launch soon".

"We are starting to extend out beyond the fashion and beauty ecosystem," Mr Molnar said. Fashion and beauty represents 35 per cent of transactions in this country compared with between 70 and 80 per cent in the US, but is expected to a settle at a level closer to Australia as it expands into a broader range of merchants.

The release on Wednesday did not provide any detail on credit losses.

Mr Stadnik said in a note on November 13 Morgan Stanley expects net credit losses of 0.41 per cent of its underlying sales in the first half, broadly in line with FY20, "though we think [the second half] will be more challenging on credit quality", with losses tipped to rise to 0.67 per cent of sales. Afterpay said in late October customer defaults in the first quarter were below historical rates in all regions.

While its active US customer numbers are now at 7.5 million, Afterpay said the number of people who had "signed up to Afterpay in the US now exceeds 13 million". This is more than the 11 million people that have used Klarna's various products since its US launch.

Afterpay's latest trading update comes after Zip said on Wednesday it had seen record transactions in November, which at $577 million were up 44 per cent on October. Zip now has 5.3 million customers, up 464,000 in November.

Shaw and Partners said Zip's US business Quadpay was ahead of Afterpay in terms of app downloads during parts of November and "has now grown materially in every month since April". Shaw estimates it is delivering $230 million in revenue on $3.2 billion in annualised volume, with revenue from the US now more than 50 per cent of Zip's group total.

Zip's share price fell 1.3 per cent to $5.95 after the strong numbers on Wednesday, as a large number of shares relating to the Quadpay acquisition came out of escrow and were sold.

Afterpay shares fell 1.9 per cent to $96.66 in late trade on Thursday after finishing Wednesday slightly higher; its all-time high of $105.80 was struck in early November.