FSN E-Commerce Ventures, the operator of beauty and personal care startup Nykaa, saw its profits decline by over 70 percent year-on-year (YoY) in Q4FY23 to Rs 2.3 crore on the back of higher raw materials prices. In the same quarter last year, the company had reported a profit of Rs 7.6 crore, regulatory filings showed.
The decline in profits comes at a time when the larger e-commerce industry has slowed down, after steep growth during the Covid years, as pointed out by analysts at Redseer, pulled down by inflationary pressures and fewer monthly shoppers.
In Q4FY23, the company’s revenue from operations however increased by around 34 percent to Rs 1,301.7 crore, from Rs 973.3 crore that it registered in the same quarter last year.
In the quarter, apart from some price pressures, Nykaa’s bottomline was also weighed down by a tax expense of Rs 4.4 crore. In the corresponding quarter last year, the company had a tax benefit of Rs 1.8 crore.
“The net profit was impacted by tax planning…Last year was also one where inflation was high,” Falguni Nayar, founder and CEO, Nykaa said during the analyst call.
The profit in the quarter was also hurt on the back of higher expenses, especially employee-related costs and other components.
Employee benefit costs amounted to Rs 127.3 crore in the quarter, which was higher than Rs 91.3 crore incurred in the same quarter last year, implying a 39 percent increase.
The likely helped the company’s EBITDA margin come in at 5.4 percent, which was up 147 basis points YoY in the quarter.
In Q4FY23, the monthly average unique users for the beauty and personal care sector increased to 23 million, up by over 21 percent from 19 million in Q4FY22. The monthly average unique users for the fashion category, after remaining flat for about five quarters at 16 million, saw a jump to 19 million in Q3FY23, but settled at 17 million in the last quarter of the previous fiscal.
The monthly average unique users for other categories fell to 2 million in Q4FY23, from 3 million in the same quarter last year.
The average order value (AOV) for the fashion category stood at Rs 4,266 in Q4FY23, which was about 18 percent higher YoY. Even on a sequential basis, the AOV was higher than Rs 3,959 in Q3FY23.
The AOVs in the beauty and personal care category was at Rs 1,803. While that was a small increase from Rs 1,716 YoY, it had fallen from Rs 1,958 in Q3FY23.
Even on a quarter-on-quarter (QoQ) basis, the company's profits dropped about 72 percent from Rs 8.5 crore in the October-December period to Rs 2.3 crore in the March quarter.
The revenue from operations too fell sequentially from Rs 1,462.8 crore to Rs 1,301.7 core, or a 11 percent drop.
The monthly average unique users, across beauty and personal care, fashion and other categories, all fell on a sequential basis. In the BPC division, the number fell to 23 million for BPC from 24 million, while it declined to 17 million from 19 million in the December quarter.
Even other categories saw a dip from 3 million to 2 million.
Full year performance
In terms of gross merchandise value (GMV), Nykaa recorded a jump of about 40 percent YoY in FY23 to reach Rs 9,743.3 crore from Rs 6,933.2 crore in FY22.
About 68 percent of the total GMV came from the beauty and personal care category, while fashion accounted for 26 percent, the other divisions like B2B were responsible for the remaining.
For the full year in FY23, the Falguni Nayar-led company saw its revenue from operations jump to Rs 5,143.8 crore, 36 percent higher on a YoY basis. In FY22, the startup’s revenue from operations stood at Rs 3,774 crore.
Its net profit for the whole year also fell around 50 percent to Rs 21 crore, from Rs 41.3 crore in FY22.
The company's EBITDA for the full year stood at 5 percent, up about 65 basis points YoY. While gross profits, fulfillment costs, marketing and advertising expenses positively helped the margins, higher seller and distribution expenses, employee spends and other expenses offset the gains, the company's investor presentation showed.
Top deck rejig
As the financial year drew to a close, in March 2023, Nykaa witnessed a slew of high-level exits which included Vikas Gupta (CEO of Nykaa SuperStore), Gopal Asthana (Chief Business Officer of Nykaa Fashion), Manoj Gandhi (Chief Commercial Operations Officer), Shuchi Pandya (Business Head), and Lalit Pruthi (Finance Head).
It was however quick to make fresh hires to drive the company’s growth. These included executives from Amazon, Walmart, Flipkart and several other companies.
Nykaa appointed Rajesh Uppalapati as the chief technology officer, while P Ganesh has been named the chief financial officer (CFO).
Uppalapati was previously VP, product engineering, with Intuit and spent around 20 years with Amazon before that. Ganesh has served as CFO in various companies including TAFE Group, Pidilite Industries, Godrej Group, Glenmark Pharmaceuticals and has over 27 years of experience.
The company has also made appointments across its technology, legal, audit & risk, consumer, and marketing teams.
Nykaa had a relatively successful listing on the bourses in November 2021, but soon lost its initial momentum as tech stocks around the world continued to get hammered. Since its listing, the company’s shares have given up about 65 percent of their value.
The company’s shares ended the day’s trading session down 2.57 percent at Rs 125 apiece on the Bombay Stock Exchange on May 24.