Nykaa, a prominent beauty and fashion e-commerce player, witnessed a significant surge in its consolidated net profit. During the September quarter of the financial year 2023-24 (FY24), their profits soared by 50% to INR 7.8 Cr, a substantial increase from the INR 5.2 Cr recorded in the same quarter of the previous year. This growth was attributed to advancements across various business divisions and effective cost management strategies.
The net profit showed a sequential increase of 44.4%, rising from INR 5.4 Cr in Q1 FY24.
In the same period, the operating revenue experienced a substantial growth of 22.4%, reaching INR 1,507 Cr in the current quarter, compared to INR 1,230.8 Cr in Q2 FY23. Furthermore, it exhibited a quarterly increase from INR 1,421.8 Cr.
Nykaa conveyed in a statement that it is observing ongoing enhancements in the quality of its business operations. They further noted that the EBITDA margin expanded to 5.4% in Q2 FY24, attributed to improved cost efficiencies, both direct and indirect.
Nevertheless, Nykaa saw a contraction of 221 basis points year-over-year in its gross margin as a percentage of revenue from operations. However, this margin remained stable when observed on a sequential basis.
In the second quarter of FY24, Nykaa witnessed a noteworthy 25% year-on-year growth in its overall Gross Merchandise Value (GMV), which reached INR 2,943.5 Cr. This figure also marked a 10.3% increase when compared to the INR 2,667.8 Cr reported in the preceding quarter.
Nykaa reported that its consolidated Gross Merchandise Value (GMV) in the beauty and personal care (BPC) category surged by 23% year-on-year, reaching INR 2,001.6 Cr in the reviewed quarter. This was a notable increase from the INR 1,850.8 Cr GMV reported for the same segment in Q1 FY24.
The company noted that the festive season plays a significant role in driving consumption within the beauty category. However, a shift of approximately 20 days in the festive calendar had an impact on the growth within the BPC category in Q2.
At the same time, there was a rise in discounts within the vertical during the quarter, which Nykaa linked to the growing presence of both domestic and international brands.
The Net Sales Value (NSV) of Nykaa’s Beauty and Personal Care (BPC) vertical increased by 19% year-on-year, reaching INR 1,167.5 Cr in Q2 FY24.
Nykaa’s “Hot Pink Sale” event, conducted in July this year, generated significant engagement. The sales event recorded over 18 million visits, with an order-to-visit conversion rate of 1.3%, the company stated.
During the post-earnings call for Nykaa, Anchit Nayar, the CEO of Beauty and E-commerce, mentioned that the September quarter showed a growing trend of heightened interest in Korean beauty brands.
Conversely, Nykaa’s fashion vertical experienced robust growth in Q2, with a 27% year-on-year increase in Gross Merchandise Value (GMV) to INR 762.8 Cr. This marked a notable rise from the INR 653.7 Cr GMV recorded in Q1 FY24 for Nykaa’s fashion vertical.
During the September quarter, Nykaa managed to decrease its employee costs, expenditure on purchased goods, and the cost of materials consumed when compared to the previous quarter. In the post-earnings call, Nykaa highlighted that their focus on cost optimization and control contributed to a notable improvement in their profit margins.
In Q2 FY24, the beauty e-commerce major allocated INR 136.3 Cr for employee benefits, a reduction from the INR 138.6 Cr spent in the June quarter. Consequently, Nykaa’s employee expenses as a percentage of revenue decreased to 9% from 9.7% in Q1 FY24. In a year-on-year comparison, this figure dropped from the 9.9% reported in Q2 FY23.
The cost of materials for Nykaa decreased by 16.7% when compared to the previous quarter, reaching INR 15.5 Cr in Q2 FY24.
Conversely, the company’s expenditures on the acquisition of traded goods dropped by 43.5% compared to the previous quarter, amounting to INR 553 Cr in the reported quarter.
Nevertheless, Nykaa witnessed a 25% year-on-year increase and a 6% quarter-on-quarter rise in marketing and advertising expenses, totaling INR 169 Cr in Q2 FY24. However, the expenses within this category as a percentage of revenue remained constant at 11.2% when compared to the previous quarter.
The company’s selling and distribution expenses rose by 16% year-on-year and 7% quarter-on-quarter, reaching INR 34.6 Cr.
In the interim, Nykaa stated that its regionalization strategy, involving the expansion of warehouse locations and capacity in FY23, resulted in a decrease in its fulfillment expenses as a percentage of revenue in Q2 compared to the same period last year.
Nykaa incurred fulfillment expenses of INR 145.9 Cr in Q2 FY24, slightly up from INR 145.4 Cr in the corresponding period a year ago.
In total, the company’s expenses rose by 5.9% compared to the previous quarter and increased by 22.3% year-on-year, reaching INR 1,502.3 Cr in Q2 FY24.
Nykaa’s shares concluded today’s trading session with a 5.1% increase, closing at INR 147.45 on the BSE.