After blockbuster IPO and listing, Nykaa posts 96% drop in Q2 profit; shares slip

In quite an anticlimactic turn of events, fashion and cosmetics e-tailer Nykaa reported a staggering 96% year-on-year decline in its second quarter net profit barely days after its blockbuster initial public offering.

Net profit for July-September fell to just Rs 1.2 crore from Rs 27 crore a year earlier. 

Even on a sequential basis the net profit was down 66% as compared with Rs 3.5 crore for the April-June quarter, as the company spent more on advertising and marketing in a bid to acquire more customers. 

This is the first time that Nykaa is declaring its results following its bumper listing, which saw its market capitalization zoom past the Rs 1 trillion mark. Its IPO was covered 82 times and its shares had nearly doubled on debut last week. On Monday, shares of Nykaa fell nearly 5% to Rs 2,244.20 apiece in morning trade.

The decline in net profit came even as Nykaa’s revenue from operations zoomed 47% in the September quarter to Rs 885 crore from Rs 603.8 crore a year earlier. Revenue rose 8% sequentially, from Rs 817 crore in April-June.

Nykaa said gross profit margins were up 345 basis points to 39.3% over the same period last year. 

Nykaa reported a 286% increase in its marketing and advertising expenditure for the quarter to Rs 121.4 crore as against Rs 31.5 crore in the same quarter last year. This was the biggest expense item for Nykaa, and dragged the net profit down. 

Nykaa Q2: Other highlights

1) Beauty and personal care segment’s gross merchandise value grows 38% to Rs 1,186 crore.

2) The GMV for the fashion segment was up 215% YoY to reach Rs 437 crore.

3) Fashion segment contributed 27% to Nykaa’s GMV in Q2, up from 14% in the corresponding quarter last year.

4) Nykaa increased its warehouse storage capacity by 37,000 square feet to 665,000 sq ft. 

5) Annualised unique transacting customers reached 7.2 million in Q2.

6) Beauty and personal care vertical’s customers grew 40% to 1.3 million.

Nykaa management commentary

Nykaa founder and chief executive officer Falguni Nayar said the company maintained growth momentum in its beauty business, accelerated the fashion business and is now focussing on brand-building. 

“Increased marketing spends led to acceleration of customer acquisition, also evident in the unique visitor and transacting customer metrics. The company continues to invest in expansion of retail stores and fulfilment capacity ahead of the festival season,” she said. 

The company said that in the second quarter it opened eight new stores including in cities like Gwalior, Kochi, Mysuru, and Ranchi. Nykaa now operates 84 physical stores across the country.