Nykaa shares down nearly 3% after low consumer spending hits fashion business in Q4

Nykaa's shares fell more than 3.5% in opening trade on Thursday after the online beauty marketplace said that a cut in consumer spending hit its fashion business in the January-March quarter.

The Mumbai-based retailer said it will focus on improving business efficiency and unit economics in the fashion vertical. Its average order values and conversion rates have improved steadily, the company said in a Q4 revenue update.

"Consumer pullback in discretionary spending has had some impact on our fashion business, leading to subdued growth in NSV this quarter. For Q4 FY23, we expect our percentage revenue growth rates in the Fashion business to come through in the late teens," Nykaa said in a regulatory filing.

The company added that the beauty and personal care (BPC) category, its biggest revenue generator, saw strong demand last quarter helped by the Pink Love sale introduced in February. The segment has witnessed higher year-on-year growth rates in Q4 FY23 as compared to the year-on-year growth rates seen in Q3 FY23, it said.

"The operating parameters for the BPC business viz. average order values and conversion rates have been robust which has aided growth in revenue. For FY23, we expect our percentage revenue growth rates to be in line with the ones seen in 9M FY23, early-thirties," Nykaa added.

The company's overall revenue, however, grew at a healthy rate last quarter boosted by sustained consumption by Tier I users.

A detailed performance update will be issued once the audited financials for Q4 FY23 are approved by the Board, Nykaa noted in the filing.

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In Q3 FY23, Nykaa's net profit plunged 71% compared to the previous year, hurt by lower discretionary spending, store expansions, and higher employee benefits costs. Other expenses also squeezed margins during the quarter, even as revenue jumped 33%.

In late March, five senior Nykaa executives resigned as part of the annual appraisal and transition process amid rising competition and falling stock prices.