Nykaa shares tank over 7% as e-tailer's Q3 profit falls 58%

Shares of fashion and beauty retailer Nykaa tanked over 7% on Thursday after net profit of its parent, FSN E-Commerce Ventures, plunged 58% year-on-year to ₹29 crore in the third quarter.

The company's consolidated revenue from operations, however, rose 36% year-on-year to ₹1,098 crore in the quarter ended December 2021.

The cosmetic-to-fashion e-tailer's operating margin contracted by 697 basis points to 6.3% in the quarter compared with 13.2% in the year-ago period.

Nykaa's marketing and advertising expenses surged by a massive 155% on a yearly basis to ₹153 crore during the quarter. "Marketing continues to be an area of investment for Nykaa, to reacquire as well as recruit new consumers as a means to ensure stronger organic growth," Falguni Nayar, executive chairperson, managing director and CEO of the firm, said in a statement.

Fulfilment expenses jumped 72% year-on-year in the three-month period to ₹162 crore. The company's employee benefits expense rose by 56% to ₹115 crore.

Nykaa's consolidated gross merchandise value (GMV) grew 49% year-on-year to ₹2,043.5 crore in the third quarter. Of this, GMV of the beauty and personal care segment grew 32% to ₹1,533 crore while fashion GMV rose 17% to ₹510 crore.

Fashion, while still an early-stage business in the Nykaa ecosystem, now contributes to 26% of the consolidated GMV year to date, Nayar said. "It has witnessed robust growth across revenue metrics, boosted by the acquisition of new customers in the year so far."

"The overall fashion portfolio grew with the launch of new international brands as well as the expansion of Nykaa's own brands, Nykd and RSVP, through strategic collaborations," Nayar added.

The CEO said the ecommerce firm continues to be on a steady growth trajectory across both beauty and fashion businesses, with an overall revenue growth of 65% for the nine month period year-on-year.

"Growth in 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 omnichannel vision," she added.

The company expanded warehouse storage space by 1.35 lakh square feet during Q3 FY22.

With the return of customers into physical retail, Nykaa said it has accelerated store expansion this quarter, with 12 new physical retail stores across the country including stores in Tier II and III cities such as Jodhpur, Rajkot, Thiruvananthapuram. Its total operational physical store count was 96 as of December 31, 2021 in 45 cities.

Since its launch, Nykaa has expanded its product categories by introducing online platforms Nykaa Fashion and Nykaa Man. Nykaa claims it offers 4,078 brands and over 3.1 million product SKUs through its website and mobile applications as of August 31, 2021.