In a robust financial quarter, FSN E-Commerce Ventures, the parent company of popular beauty and personal care retailer Nykaa, reported a significant 50% increase in net profit, reaching Rs 7.8 crore in Q2FY24, up from Rs 5.2 crore in the same period last year. This remarkable growth was primarily fueled by the exceptional performance of Nykaa’s fashion business, which experienced a surge in demand during the quarter.
The surge in profits was coupled with a noteworthy 22% rise in revenue from operations, reaching Rs 1,507 crore in Q2FY24, compared to Rs 1,230.8 crore in the corresponding period of the previous year. The company also witnessed an improvement in its earnings before interest, taxes, depreciation, and amortization (EBITDA) margin, which rose from 5% in Q2FY23 to 5.4% in Q2FY24.
Nykaa’s Fashion business outshined the previous quarter, attributing its success to strategic measures taken to enhance financial stability. Adwaita Nayar, CEO of Nykaa Fashion, explained that the unit implemented initiatives to minimize return to origin (RTO) instances by blacklisting customers displaying unfavorable behavior and blocking specific pin codes associated with such behavior. Additionally, the Fashion arm introduced convenience charges at the cart level to boost profitability, a move that positively impacted the business.
Furthermore, Nykaa’s prudent financial management was evident in reduced marketing expenses, accounting for 24.9% of net sales in Q2FY24, down from 28.4% in Q2FY23. These initiatives collectively propelled Nykaa Fashion closer to EBITDA profitability, marking a significant milestone for the company.
In the beauty and personal care category, heightened competition led to increased discounting by various companies. Nykaa attributed this trend to the rise of numerous homegrown and international brands prioritizing the Indian market.
Nykaa’s total expenses for Q2FY24 amounted to Rs 1,502 crore, reflecting a 22% increase from Rs 1,229 crore in the same period last year. The company’s strong performance in the first half of the fiscal year positions Nykaa optimally for the remainder of the year, with robust consumer demand anticipated in the historically superior second half.
In the realm of new ventures, Nykaa’s Superstore reported a Net Sales Value (NSV) of Rs 98.60 crore in the quarter, reflecting a remarkable 105% year-on-year growth. As of September 30, 2023, the Superstore business has expanded its reach, catering to nearly 1.3 lakh transactional retailers spanning 770 cities. Notably, this new business segment exhibited noteworthy improvements in its contribution margin as a percentage of NSV, rising from -33.4% in Q2FY23 to -14.8% in Q2FY24. Nykaa attributed this positive shift to operational enhancements within this vertical. Key cost factors such as fulfillment expenses, marketing and advertising expenditures, and selling and distribution costs all experienced significant improvements. Additionally, Nykaa’s array of new businesses includes the eB2B platform Superstore by Nykaa, Nykaa Man, the International division, the content-driven platform LBB, and the wellness brand Nudge.
Nykaa reported a consolidated revenue of Rs 130.50 crore
The fashion division of Nykaa reported a consolidated revenue of Rs 130.50 crore, marking a 28% increase on a year-on-year basis. This growth was underpinned by a robust 32% year-on-year rise in Net Sales Value (NSV) in Q2FY2024, primarily driven by a 30% year-on-year surge in Annual Unique Transacting Customers (AUTC), reaching 2.8 million as of September 30, 2023. Nykaa highlighted the continuous expansion of its fashion business with enhanced profitability. In Q2FY2024, the contribution margin as a percentage of NSV for Nykaa Fashion stood at 4.7%, a significant improvement from 2.3% in Q2FY2023.
This improvement was facilitated by enhancements in pre-delivery leakages and marketing expenses. The fashion division’s in-house brands, including Nykd (Lingerie), Twenty Dresses, RSVP (Western wear), Gajra Gang, Likha (Indian wear), and Pipa Bella, and IYKYK (Accessories), experienced notable growth, achieving an NSV of Rs 44.60 crore for the quarter, reflecting a substantial 44% year-on-year increase.
Nykaa, in collaboration with Estee Lauder Group of Companies, introduced Beauty & You India, an unprecedented initiative aimed at identifying and nurturing the next generation of beauty entrepreneurs in India. The partnership offers non-equity grants and mentorship to support budding beauty innovators.
Nykaa joined forces with Priyanka Chopra Jonas to introduce Anomaly, her exclusive hair care brand, to the Indian market through Nykaa.com and Nykaa stores.
Nykaa partnered with HUL to introduce ‘Acne Squad,’ HUL’s new science-based skincare brand, exclusively available at Nykaa.
Nykaa Fashion teamed up with the renowned fashion e-tailer “Revolve” to grant customers access to 400+ international brands.
Nykaa collaborated with the Apparel Group to launch a comprehensive omnichannel, multi-branded retail operation business in the Gulf Cooperation Council (GCC) on October 6, 2022.
Reflecting on the outcomes, Falguni Nayar, Executive Chairperson, MD, and CEO, remarked, “Our business has demonstrated consistent, robust growth, coupled with investments in future capabilities. Our Beauty segment, both online and offline, exhibited substantial growth with enhanced margins. We have witnessed notable cost efficiencies in our fulfillment processes as we transition to regional warehouses.
Following the post-COVID period, our accelerated investments in new store openings and store enhancements have resulted in increased foot traffic and higher same-store sales. There is a discernible uptick in consumer demand for premium beauty, personal care, and wellness products, signaling a promising second half of FY23.”