By Stuart Condie

SYDNEY--Afterpay Ltd. said first-quarter underlying sales more than doubled on a year earlier as it added 1.3 million new customers since the end of fiscal 2020.

The buy-now-pay-later provider on Wednesday reported underlying sales of 4.1 billion Australian dollars (US$2.9 billion) for the three months through September, compared with A$1.9 billion a year earlier. It said unaudited merchant revenue margins performed in-line with those recorded in fiscal 2020 and that gross losses continued to trend lower.

Afterpay said it had 11.2 million active customers, up from 5.7 million a year ago and from 9.9 million at the end of fiscal 2020. It had 6.5 million customers in the U.S., where it launched in 2018.

Afterpay and its rivals have experienced a surge in popularity after coronavirus restrictions prompted shoppers to turn to ecommerce in increasing numbers, many attracted by the lower cost to consumers than traditional payment methods.

The company said active merchants rose 70% on year to 63,800 after retailers with more than A$10 billion of total addressable online sales went live in the U.S. during the quarter. It said that helped improve customer acquisition at the start of 2Q, with the October daily average number of new customers up 18% compared with the 1Q average.

Afterpay said its Canada launch was progressing well, while in-store sales in Australia and New Zealand represented about 20% of the region's A$2.2 billion underlying sales as coronavirus restrictions eased.

It said a move into Asia was progressing but did not give details.

The U.S. showed A$1.6 billion in underlying sales. Stripping out the effect of the stronger Australian dollar, Afterpay said it achieved double-digit percentage growth on the fourth quarter of fiscal 2020.

Analysts have cautioned that Australian regulators could extend surcharging rules currently applicable to payment methods including credit cards to buy-now-pay-later 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.

The country's financial regulator is also updating its 2018 report into the installment-payments industry for likely release before the end of 2020. Afterpay said on Wednesday the buy-now-pay-later industry's self-compiled code of practice is expected to be finalized after that report.

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

10-27-20 1835ET