Nykaa Q2 Results: Profit Rises, Margins Improve Despite Higher Expenses
Nykaa Q2 Results FY23: Net profit rose 4% sequentially to Rs 5.2 crore, while margin improved to 5% from 4% a quarter ago.
Online beauty and fashion retailer Nykaa’s second-quarter profit rose after falling for the last two consecutive quarters, and margins improved despite higher expenses. The bottom line, however, missed estimates.
Consolidated net profit of FSN E-Commerce Ventures Ltd., the parent of Nykaa, increased 4% sequentially to Rs 5.2 crore in the quarter ended September, according to its exchange filing. That compares with the Rs 16.3-crore consensus estimate of analysts tracked by Bloomberg.
Net profit rose 4.4 times over a year earlier.
Key Highlights (QoQ)
Revenue rose 7% to Rs 1230.8 crore, against the forecast of Rs 1,245.2 crore.
Operating profit rose 33% to Rs 61.1 crore, against the estimate of Rs 58.4 crore.
Margin came in at 5% as against 4%. Analysts had pegged it at 4.7%.
Expenses shot up 7% to Rs 1,229 crore.
The gross merchandise value grew 8.8% to Rs 2,345.7 crore. It rose 45% compared to the corresponding period last year.
For fashion, the gross merchandise value grew 2.93% to Rs 599.1 crore. Year-on-year, it rose 43%, contributing 26% to overall GMV. Own brands' share nearly doubled to 13%.
Annual unique transacting customers for fashion business grew 66% YoY to 2.1 million and for beauty and personal care business, it grew 31% year-on-year to 9.1 million as of Sept. 30, 2022.
Gross merchandise value for beauty and personal care grew 12.5% to Rs 1630.1 crore and was up 39% over Q2 FY22. Own brands' share to overall GMV rose to 12.1% versus 10.3% a year ago.
Total beauty and personal care orders grew to 8.4 million.
GMV for other businesses including NykaaMan, Little Black Book, Nudge, the eB2B platform SuperStore by Nykaa, and international grew 37% to Rs 116.5 crore. It contributed 5% to overall GMV in Q2.
"Our business has delivered sustainable, strong growth while investing in capabilities for the future," said Founder and CEO Falguni Nayar.
"There has been structural improvement in fulfilment costs as we move to regional warehouses," she said.
Nykaa's investments post pandemic in new store rollouts as well as store upgradation have resulted in improved footfalls and higher same-store sales, according to the billionaire entrepreneur.
For the fashion business, the company said it seeks to build a "unique customer proposition" aided by investments in a differentiated product, collaborations with global brands, and the expansion of its owned brand portfolio. New season merchandise accounted for 24% of Nykaa Fashion GMV, while international brands are at 13% of western wear category GMV in Q2 FY23.
"Repeat buyers in fashion now contribute 66% of GMV, giving us confidence in our product proposition," said Adwaita Nayar, chief executive officer at Nykaa Fashion.
Digital marketing costs for the fashion business are slightly higher than during Covid period, resulting in marketing costs sustaining at Q2 FY22 levels. Nayar also pointed out that customer acquisition costs had risen 20% during the quarter due to inflationary pressure. "However, we have been able to maintain cost per order under control."
Consumer demand picked up across segments despite July-September being an off-season quarter, Anchit Nayar, chief executive officer, beauty e-commerce, told BQ Prime in a post earnings call. Demand for premium beauty, personal care and wellness, which slowed as consumers resorted to downtrading amid soaring prices, is also showing signs of buoyancy, he said. The second half of FY23 looks "promising" on the back of a strong festive season, the upcoming wedding season and its annual flagship sale event in November.
During the quarter, the company said its 'Hot Pink Sale' event delivered strong omnichannel performance with 47% year-on-year GMV growth, with highest-ever monthly unique visitor count of 25 million on the platform. Nykaa's Fashion Grand Festive Carnival also achieved highest-ever monthly unique visitor count of 18 million on the platform in September.
Nykaa opened 12 stores during the quarter, taking the total count to 124, including two new fashion stores, with a total area of 1.2 lakh square feet across 53 cities, as of Sept. 30, 2022, according to a company statement.
Shares of FSN E-Commerce ended 2.44% higher at Rs 1,185.75 apiece on the BSE. Nykaa shares have fallen more than 48% since its market debut in November last year.