Nykaa's Q1 operating revenue rises 24% YoY; fashion business slows

Beauty retailer Nykaa posted a 24% increase in operating revenue to Rs 1,421 crore in the first quarter of FY24, up from Rs 1,148 crore in the same period last year. However, this was matched by a 23% rise in total expenses to Rs 1,419 crore, weighing down the firm's bottom line.

The firm's profit (attributable to equity shareholders) fell 27% to Rs 3.3 crore in the first quarter of FY24, down from Rs 4.5 crore last year, hurt by slowing growth in the fashion segment. Profit after tax (including non-controlling interests) stood at Rs 5.4 crore, up 8% from the same quarter last year.

The Falguni Nayar-led company's gross merchandise value (GMV) in the beauty and personal care (BPC) business—its largest segment by revenue—grew 24% year-on-year across its ecommerce, physical retail and consumer brands portfolios. The segment saw traction from 10.3 million annual transaction customers last quarter, while nearly 80% of the GMV contribution came from existing consumers, according to the company.

GMV measures the total value of all products sold over a period of time (averaged sale price per item multiplied by number of items sold in a quarter).

Nykaa said its growing share of existing customers "signals very healthy and sustainable customer acquisitions and is a reflection of positive shopping and post-order experiences." Offline retail space increased by 43% compared to last year with 152 stores as of June 30, 2023.

Nykaa Fashion growth slows

Nykaa's second-largest segment by revenue—Nykaa Fashion—has shown muted growth over the last few quarters, primarily due to rising competition from rivals including Myntra, Purplle, and TataCliq. The ecommerce company had warned of a weak long-term industry outlook last quarter.

In the April-June period of FY24, the segment recorded a 12% rise in GMV given the weak sentiment in the fashion industry, particularly in the last quarter. However, Nykaa said the Hot Pink Sale held in July has helped boost momentum to achieve healthy year-on-year growth.

The annual unique transacting customer base grew over 160% to 2.6 million in Q1 FY24. The current average order value for the platform stood at Rs 4,400.

The Hot Summer Sale, held in May 2023, helped Nykaa bag over 190,000 orders in the fashion segment and saw the participation of over 25,000 brands.

"... Nykaa Fashion's growth in the quarter was much ahead than the industry growth but below its

long-term trajectory," Falguni Nayar, CEO of Nykaa, said in a statement.

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House of brands

Nykaa's house of brands portfolio in the BPC segment—including Dot&Key, which was acquired in 2021, and the joint venture with Kay Beauty established in 2018—is said to have logged a 40% rise in GMV.

Dot&Key witnessed a GMV growth of over 5X since the acquisition, according to the company. The brand is profitable and has crossed an annualised GMV run rate (based on Q1 FY24 GMV) of Rs 300 crore.

In the fashion vertical, owned brands such as Twenty Dresses and Nykd by Nykaa saw a 30% rise in GMV last quarter and the firm expects offline sales to drive growth in the segment. At present, Twenty Dresses and RSVP are present in 112 multi-brand outlets while Nykd by Nykaa is available at six exclusive brand outlets.

Meanwhile, Nykaa's eB2B vertical, SuperStore by Nykaa, scaled up to 1,19,564 transacting retailers across 699 cities, with 188 brands listed as of June 30, 2023.

Nykaa's shares traded 0.6% higher on Friday to close at Rs 146.55 apiece.

The beauty and fashion retailer witnessed the exit of four key senior executives since April, including Chief Marketing Officer Shalini Raghavan.

(The story has been updated to highlight Nykaa's revenue figure in the headline, instead of profit, after a company clarification)