Nykaa, the Indian beauty retailer, saw a 71% decrease in net profit in the December quarter due to category changes in its highest contributing beauty and personal care business, along with higher festive discounts and other significant expenses that squeezed margins. Despite the decline in net profit, the company’s revenue rose 33% from a year earlier to Rs 1,463 crore, in line with analysts’ estimates. Total expenses in the third quarter increased by 36% year-on-year to Rs 1,456 crore, with higher employee benefits costs and other expenses dragging down Nykaa’s EBITDA margin to 5.3% from 6.3% a year earlier. Nykaa’s CEO, Falguni Nayar, cited lower consumer discretionary spending as the reason for the decline in margins, and the company plans to open 50 more offline stores next year, in addition to its 135 stores across India.
Despite the decrease in net profit, Nykaa’s gross merchandise value (GMV) grew by 37% to Rs 2,796 crore, with the beauty and personal care segment, which is Nykaa’s largest revenue generator, seeing a 26% rise in GMV to Rs 1,901 crore. Monthly active users in the beauty and personal care segment also increased by 22% to 24.2 million from a year earlier. Nykaa’s fashion segment also saw significant growth, with a 50% increase in GMV to Rs 724.4 crore. The company’s Pink Friday Sale in November achieved a 40% GMV growth, and the performance has been especially good given the backdrop of eight fewer festive days in Q3FY23 compared to Q3FY22.
The company is optimistic about the final quarter of the fiscal year, as it expects it to be “decent” and “more interesting” due to India’s wedding season and its ongoing Pink Love sale. Fashion now contributes 25.9% of GMV, while other businesses led by SuperStore, Nykaa’s business-to-business initiative, contribute 6.1% of GMV, up from 2.4% in the year-earlier third quarter. Nykaa has also established a presence in e-marketplaces in the United States, Mauritius, and the UAE in the previous quarter.
Nykaa has appointed Sujeet Jain, the chief legal and regulatory officer, as the company secretary and compliance officer, effective February 14, in place of Rajendra Punde. The company recently appointed former TAFE Group CFO P Ganesh as its finance head, effective February 3. Despite the promising growth, Nykaa’s shares fell 2.68% to close at Rs 150.55 apiece ahead of the results announcement.
