Indian retailer Nykaa reported a 61% surge in quarterly profit on Monday, as the company's marketing investments paid off with more consumers purchasing higher-priced beauty products on its online platform.
Listed as FSN E-Commerce Ventures, Nykaa posted a profit of 261.2 million rupees ($2.99 million) for the quarter ended Dec. 31, according to a regulatory filing.
Nykaa, to cash in on the turbocharged growth in the $28 billion Indian beauty and personal care industry, has been pouring money into marketing and co-developing a celebrity brand called Kay Beauty with Bollywood actor Katrina Kaif.
Nykaa's beauty business, which accounts for more than 90% of its topline, reported a 27% increase in revenue at 20.6 billion rupees in the quarter. The segment sells products from a spate of domestic and international premium brands, such as Estee Lauder and singer Rihanna's Fenty Beauty.
Total revenue rose 27% to 22.67 billion rupees, counterbalancing a 26% marketing cost-led jump in expenses. Marketing and advertisement expense rose 29% to 2.93 billion rupees.
"A lot of the growth has been driven by the big investments, which we've made over the past several quarters, ... around customer acquisition," Anchit Nayar, the CEO of Nykaa's beauty business, said on an earnings call.
Gross margin expanded by 119 basis points during the reported quarter as Nykaa sold more premium products that typically carry increased margins.
Nykaa's fashion business, which sells apparel and accounts for a tenth of its overall revenue, climbed 21% to 1.99 billion rupees.
Shares in Nykaa closed 2.3% lower at 169.44 rupees ahead of the results.
