Nykaa Q3 profit slumps nearly 60% as marketing costs, wages spike

Fashion and beauty products retailer FSN E-commerce Ventures Ltd, which owns and operates Nykaa, reported a drop of almost 60% in consolidated net profit for the three months ended December 2021 due to a drastic increase in marketing costs and wage expenses.

Nykaa’s third-quarter net profit declined to Rs 27.93 crore from Rs 68.97 crore a year earlier. But profit jumped sequentially, from Rs 1.17 crore for the second quarter.

Consolidated revenue from operations stood at Rs 1,098.36 crore for the quarter ended December 2021 as against Rs 807.96 crore in the corresponding period last year.

Revenue for the three months ended September stood at Rs 885.26 crore.

The stock had faced massive selling pressure on Tuesday as traders booked profits after gaining in the previous seven straight sessions. It closed at Rs 1,848.90 apiece on the NSE on Wednesday, down Rs 13 or 0.7% from the previous close. The stock is down 21% since its listing in November 2021.

In contrast, the benchmark Nifty index on the NSE, a gauge of top 50 companies, has recouped some of its losses after witnessing a correction. 

Nykaa announced its earnings after market hours on Wednesday.

Other Key Highlights

1) Earnings before interest, tax, depreciation and amortisation stood at Rs 690 crore, while EBITDA margin came at 6.3%.

2) Total costs surged 46.8% year-on-year to Rs 1,067.29 crore.

3) Quarterly gross merchandise value (GMV) rose 49% to Rs 2,043.5 crore. Total orders jumped to 9 million from 6.5 million.

4) Marketing and advertising expenses more than doubled to Rs 153.6 crore.

5) Nykaa’s beauty and personal care products segment contributed 75% to the GMV, while the fashion segment's share was 25%.

Management Commentary

Falguni Nayar, Nykaa's Executive Chairperson, MD and CEO, said the company remains on path to steady growth trajectory across both beauty and fashion businesses.

“Growth in the beauty business accelerated in a relatively normalized Covid environment, with a strong revival in the cosmetics category. Our physical store network also experienced one of its strongest quarters ever and we continued opening new stores in line with our larger omni-channel vision,” said Nayar.

“Marketing continues to be an area of investment for Nykaa, to re-acquire as well as recruit new consumers as a means to ensure stronger organic growth. Fashion, while still an early-stage business in the Nykaa ecosystem, now contributes 26% of the consolidated GMV year to date. It has witnessed robust growth across revenue metrics, boosted by the acquisition of new customers in the year so far,” she said.

“The overall fashion portfolio grew with the launch of new international brands as well as the expansion of Nykaa's owned brands, Nykd and RSVP, through strategic collaborations,” she added.