With thousands of retail stores closed and job losses putting pressure on consumer spending, shares in buy-now-pay-later (BNPL) companies have been battered over the past six months.
But Zip Co (ASX: Z1P) has escaped the March quarter relatively unscathed as far as performance is concerned, against a backdrop of sustained demand despite uncertainty surrounding the virus.
The group's revenue jumped 96 per cent year-on-year in the quarter, with transaction volumes in Australia and New Zealand reaching $2.1 billion.
In April, trading month-to-date for the first seven days of the month was up 6 per cent and was also 15 per cent higher than in February.
The group believes there are a few factors playing in its favour to ride out the crisis, including exposure to online sales and recession-proof sectors including bills, home improvements and office supplies, electronics and gaming, whitegoods and furniture.
Zip Co notes trading in these cateogires has offset a reduction in sales across fashion and apparel, travel and leisure, personal care and hospitality.
The average age of Zip Co customers is 35, representing a slightly older, more financially savvy customer segment that has gone through a fully underwritten application.
Nonetheless, the fast-evolving changes to the economy have led Zip Co to undertake cost-cutting measures to position the business for the possibility of a protracted downturn.
In the last week the company has reduced its staff numbers by 78, representing around 20 per cent of its full-time workforce, thus cutting costs by $8 million.
Planned expenditures have been slashed to $1.2 million for Q4, compared to $3.2 million in Q3.
The group will also delay its UK launch date and put on hold any team increases on the ground. The board, executive team and senior leaders have taken a voluntary 20% reduction in salaries.
Zip Co estimates a total liquidity to meet its corporate and general expense needs of around $30 million, which in combination with the cost-cutting measures gives it "sufficient liquidity to support the growth of the business".
Managing director and CEO Larry Diamond (pictured) says the virus has presented an unexpected and significant challenge to many in the community, and the company's priority remains ensuring the safety of staff and supporting its customers and retail partners.
"Despite the economic impact of Covid-19, the Zip ANZ business continues to perform strongly, with healthy customer growth, transaction volume, and a strong pipeline of new partners in the March quarter," he says.
"Zip is well funded and uniquely positioned to trade through the current environment, given our product differentiation, strong proprietary credit platform, healthy repayment profiles and penetration into defensive, everyday spend categories.
"We continue to believe the credit card model is broken with customers in need of flexible, responsible, interest free alternatives."
The group applauds the government's "bold and decisive action" in response to the coronavirus to keep Australians employed, small business supported, and ensuring a strong banking sector.
"Zip would also like to encourage the Government to broaden the eligibility of the financial sector-specific packages to include Fintechs, who add a vital, competitive and innovative segment to the market," he says.
Updated at 3:03pm AEST on 8 April 2020.