Indian e-commerce company Nykaa saw a 49 percent decline in quarterly net profit as increased expenses outweighed demand for personal care and fashion products.
FSN E-Commerce Ventures Ltd, the parent company of Nykaa has been seeing a fall in profits in a streak for the three quarters. The marketing cost incurred by the company has dampened the taste of profits.
Consolidated net profit declined to Rs 8.56 crore ($1.10 million) from Rs 16.88 crore in the year ago period, while revenue from operations jumped to Rs 973 crore from Rs 741 crore during the same period, showed the regulatory filing.
The cosmetics-to-fashion company led by Falguni Nayar said marketing expenses in 2020 were exceptionally low as the company did not pay much attention to advertising due to the pandemic.
The company’s GMV increased 71 percent year on year to Rs 6,933.2 crore in the full fiscal and rose 45 percent to Rs 1,797.9 crore in the quarter ending March.
Fashion GMV represents one-fourth of total GMV. EBITDA margin fell to 4.3 percent in fiscal 2022 from 6.4 percent a year ago.
The e-commerce platform blamed a fall in EBITDA on launch of new businesses, soaring marketing costs, and expansion of fulfillment capacity behind its profit fall.
“We saw an increase in fulfillment cost especially with the impact of Covid. So we opened more warehouses to reduce the air and shipment cost. This cut down our fulfillment cost to 9.7 percent in the March quarter under review which is very similar to pre-Covid levels,” said Nayar.
Nykaa has 23 warehouses spreaded in 11 cities, she said.
Nykaa’s total costs grew 34% to Rs 935 crore, including a 48 percent increase in fulfillment costs and a 66 percent increase in marketing and advertising spending.
On marketing costs, Nayar said, “We acquired 4.4 million customers despite a very slight increase in marketing costs. GMV from new customers is over 27 percent. In fashion, we acquired more than a million customers last year and that has taken up our marketing cost to 27.4 percent. Fashion is still at an early stage so in a year or two we should see a better returning customer ratio so we can better control the costs of marketing.”
Nykaa To Focus On Strengthening Nykaa SuperStore and NykaaMan:
In a separate announcement, Nykaa said it is looking to strengthen its omnichannel presence, with a particular focus on business verticals including Nykaa SuperStore and NykaaMan pari passu with fashion vertical and partnerships with domestics and international brands.
Commenting on the omnichannel business, CEO Falguni Nayar said the company current has 105 stores across 49 cities and the GMV from the physical stores is 7.5 percent for the fourth quarter: “The plan is to grow this slightly more and we will be looking to launch 300 stores in 100 cities and expand that further.” Nykaa also plans to launch fashion stores.
Nykaa’s monthly active users in fashion for the full fiscal stood at 15.3 million while average order value amounted to Rs 3,420.
For the beauty business, the number of orders increased 27 million in FY2022, up 58 percent. Monthly active users for the fiscal stood at 20.8 million while average order value plummeted to Rs 1,864, down 5 percent.