Nykaa Q3 Results: Profit Jumps Sequentially But Misses Estimates

Online beauty and fashion retailer Nykaa’s third-quarter profits rose, led by growth in transacting customers, even as it missed estimates.

Net profit of FSN E-Commerce Ventures Ltd., the parent of Nykaa, rose to Rs 27.9 crore in October-December from Rs 1.2 crore in the preceding quarter, according to its filing with exchanges. That compares with the Rs 36.2-crore consensus estimate of analysts tracked by Bloomberg.

Year-on-year, however, the online beauty marketplace reported a 59% drop in net profit from Rs 69 crore, hit by a jump in expenses.

Key Highlights (QoQ)

• Revenue rose 24% to Rs 1,098 crore compared with a projection of Rs 1,074.6 crore (36% increase year-on-year).

• Operating profit rose 2.4 times to Rs 70 crore. Analysts had pegged it at Rs 72.2 crore.

• Margin expanded to 6.3% from 3.3%, and against a forecast of 6.7%.

• Expenses rose 20% sequentially and 46.8% over a year earlier to Rs 1,067.3 crore.

"We continue to be on a steady growth trajectory across both beauty and fashion businesses, with an overall revenue growth of 65% for the nine month period year-on-year," Falguni Nayar, managing director and chief executive officer of Nykaa said in the statement. Marketing will be an area of investment for the company to reacquire as well as recruit new consumers, she said.

In the third quarter, Nykaa added 12 outlets, including stores in tier 2-3 cities such as Jodhpur, Rajkot, and Thiruvananthapuram as consumers gradually returned to physical retail, it said in its investor presentation. Its operational store count stood at 96 as of Dec. 31 across 45 cities. It also expanded warehouse storage space by 1.35 lakh square feet during the quarter.

According to Nayar, the Nykaa physical store network "experienced one of its strongest quarters ever" with demand for cosmetics reviving in a relatively normalised Covid environment.

Other Highlights (QoQ)

• Gross merchandising value jumped 26% to Rs 2,043.5 crore.

• Average order value in beauty and personal care rose to Rs 1,966 from Rs 1,913.

• Average order value in fashion category increased 10% to Rs 3,590.

• Advertisement revenue grew 33% sequentially and 53% year-on-year, driven by recovery in brand spends on advertisements.

The third quarter saw Nykaa bringing global beauty brands Sol de Janeiro, Elemis, 111Skin and Nudestix to Indian consumers across premium and luxe categories. In the fashion segment, Nykaa launched Scandinavian brand NA-KD in India. Nykaa Fashion tied up with designer Nikhil Thampi for its owned brand RSVP. It also launched Masaba for Nykd, a sleepwear collection created in collaboration with designer Masaba Gupta.

Fashion, while still an early-stage business in the Nykaa ecosystem, now contributes 26% of the consolidated GMV year to date. "This segment has witnessed robust growth across revenue metrics, boosted by the acquisition of new customers in the year so far," Nayar said in a statement.

Shares of the company ended trade on Friday at Rs 1,848.9 apiece versus the IPO price of Rs 1,125. Earlier on Jan. 24, Nykaa shares hit its all-time low amid global selloff. The market cap of the company, which had breached Rs 1 lakh-crore mark on its listing day, has slipped to Rs 87,000 crore.