Nykaa Q1 revenue up 24% YoY led by beauty category, in-line with estimates

CEO Falguni Nayar will taking up the role of CMO after Shalini Raghavan resigned from the position this year.

FSN E-Commerce Ventures, which operates beauty and personal care (BPC) company Nykaa, saw its profits fall by about 27 percent on a year-on-year (YoY) basis in Q1FY24 to Rs 3.3 crore on dragged by a slowdown in discretionary spends during the quarter.

In the same quarter last year, the company reported a profit of Rs 4.6 crore. In both cases, equity shareholders of parent has been considered.

At the company-level, FSN E-Commerce Ventures had reported a net profit of Rs 5.4 crore in Q1FY24, which was about 8 percent higher than Rs 5 crore in Q1FY23.

The Mumbai-based company, in a performance update filing on July 7, had said that inflationary pressures have started to moderate and consumption in the BPC category remains strong in the urban areas. However, the apparel industry – where Nykaa Fashion is present – was impacted, especially in small towns as people cut back on discretionary expenses.

In the same update, Nykaa’s said, “For Q1 FY24, at a consolidated level, we expect revenue to grow in the mid-twenties YoY.”

The company's revenue from operations stood at Rs 1,421.8 crore in Q1FY24, which is an increase of around 24 percent from Rs 1,148.4 crore that it registered in the same quarter last year.

Nykaa's gross merchandise value (GMV) grew 24 percent on a YoY basis to Rs 2,667.8 crore in Q1 FY2024.

“Our beauty vertical continues to shape into an ecosystem of its own – with steady and balanced growth across our online platforms, physical footprint as well as our consumer brands," Falguni Nayar, executive chairperson, MD, and CEO, said on August 11.

The company said its physical retail space increased by 43 percent YoY with 152 stores as of June 30, 2023.

"Fashion’s consumer brands also experienced steady growth with our own labels now spanning across categories – westernwear, indianwear, lingerie, menswear, accessories and much more. Nykaa Fashion’s growth in the quarter was much ahead than the industry growth but below its long-term trajectory," she added.

Nykaa's profits in the quarter was also hurt by higher expenses, especially the costs related to employees. Employee benefit costs amounted to Rs 138.6 crore in the June quarter which was 22 percent higher than the Rs 114.8 crore that Nykaa had spent in the same period last fiscal year.

In Q4FY23, Nykaa’s employee-related expenses stood at Rs 127.3 crore.

"With regional warehouses driving lower fulfilment expenses, management proactively focused on lowering marketing costs and business mix shifting towards higher margin BPC, we expect the overall EBITDA margin to improve...," analysts at JM Financial said in a note.

EBITDA margin was around 5.2 percent in Q1 FY2024 a growth from 4 percent from the year ago period.

Sequential performance 

However on a quarter-on-quarter (QoQ) basis, the company's profits increased by about 38 percent from Rs 2.4 crore in the January-March period to Rs 3.3 crore in the three months to June, regulatory filings showed.

The revenue from operations also climbed from Rs 1,301.7 crore in Q4FY23 to Rs 1,421.8 crore in Q1FY24, representing about a 10 percent change.

Nykaa Fashion, run by Falguni Nayar's daughter, Adwaita Nayar grew just 12 percent on a YoY basis to reach a GMV of Rs 653.7 crore.

"Nykaa Fashion’s growth in the quarter was much ahead than the industry growth but below its long-term trajectory," Falguni Nayar said.

Top exits at Nykaa

Nykaa's results come at a time when it has been hit by a slew of top-level exits. Since April, six senior executives, including the company's chief marketing officer, Shalini Raghavan, among others have quit the company.

CEO Falguni Nayar will be taking on the CMO's role hereon.

Those exits came after five senior executives, including Nykaa SuperStore CEO Vikas Gupta, Chief Business Officer Gopal Asthana and Chief Commercial Officer Manoj Gandhi resigned from the company in March.

While Gupta had joined VLCC as CEO, Asthana jumped to Tata Cliq to lead the e-commerce platform months after departing from the Falguni Nayar-led company, which is facing competition from Reliance, Tata and several other players.

While Reliance is setting up Tira to take on new-age players in the BPC space, Tata is ramping up its e-commerce offerings under Tata Cliq and is roping in experienced people to lead its efforts. With deep pockets, large traditional players have been able to attract talent from companies like Nykaa, which has impacted their growth trajectory.

Nykaa had made a bumper public market debut in 2o21. The share price, from a high of around Rs 400 apiece, was now on a downward trajectory. FSN E-Commerce's shares ended 0.34 percent higher on Friday at Rs 146.25 on the BSE.

(Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary)