Dear Reader,
The December quarter results of FSN E-Commerce Ventures comes as a breath of fresh air for investors depressed by anaemic growth numbers of consumer goods companies. The operator of the Nykaa platform continues to see healthy growth in an environment marked by weak urban consumption trends.
Revenues in the December quarter are up 27 percent, driven by continuing traction in the core beauty and personal care products. In comparison, sales at Hindustan Unilever increased by a tepid 2 percent. The performance of Godrej Consumer Products and Emami is also subdued.
FSN’s 25 percent revenue growth so far this fiscal is far higher than traditional consumer goods companies. The 25 percent growth comes on the back of a 24 percent revenue expansion in FY24.
The superior growth underlines the changing market trends in the consumer markets. Consumers are giving priority to convenience, discounts, spread of product portfolio and delivery speed. FSN’s business platforms ticks these boxes.
Discounts were substantial last quarter. The focus is on quick delivery. In top cities, around 70 percent of beauty and personal product orders are delivered on the same or next day. Companies such as Swiggy and Zomato that offer quick delivery of products are also seeing strong growth even though their path to profitability in new business ventures remains a concern.
Of course, sales do not generate by themselves. FSN is investing significant amounts on promotional activities and customer acquisition.
Investments in customer acquisition in earlier quarters have helped FSN clock strong growth in the December quarter. With the strategy yielding results, the management plans to maintain investments in customer acquisition activities and expand the branded product portfolio.
For the stock, it is crucial the company maintains its revenue growth momentum and profit margins. Competition from quick commerce and traditional consumer goods companies is rising.
The apparel business continues to lose money. The management aims to achieve break even in the fashion apparel business by the next fiscal year. Striking a right balance between growth and profitability will be important.
The broader message is that while manufacturers of consumer goods may find the going tough, companies in the last mile of the purchasing journey seem to be better placed.
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