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Nykaa's Q3 profit hit by lease, warehousing costs

By Malvika Maloo

  • 13 Feb 2023
Nykaa's Q3 profit hit by lease, warehousing costs
Credit: 123RF.com

Online beauty and personal care retailer Nykaa reported a 71% dip in its net profit, to Rs 8.5 crore for Q3FY23, as expenses related to lease rentals and warehousing rose.

The company expects these costs to come down, having already made many of the intended investments in its office spaces and warehouses, management told reporters in an interaction.

“A large part of the investment on the warehouse side is behind us,” said Falguni Nayar, chief executive of Nykaa. “On the store (side), the momentum will continue. We intend to roll out another 50 stores in the year ahead.”  

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Shares of FSN E-Commerce, which operate Nykaa, ended 3.3% lower at Rs 149.65 per share on the BSE. In comparison, the benchmark Sensex was down 0.41%. 

 Nykaa’s revenue from operations grew 33% to Rs 1,462.8 crore during the quarter, traditionally one its strongest quarters, when it hosts its flagship Pink Friday sale. The sale, held in November 2022, led to a 37% rise in its gross merchandize value (GMV), to Rs 2,796.5 crore for the period under review.

Nayar is optimistic on macro factors affecting the business. “The worst of inflation, especially for India, is behind us, and global supply chain costs should start coming down.”

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On the operational front, Nykaa’s Ebitda (earnings before interest, taxation, depreciation and amortization) grew by 13% to Rs 78.2 crore compared to the same period last year on the back of scaling efficiency.

Ebitda margin, however, saw a decline of nearly 90 basis points (bps), to 5.3%. One basis point is one-hundredth of a percentage.

Segmentally, the fashion vertical’s GMV grew by 50% to Rs 724.4 crore during the quarter. 

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"The performance has been especially good given the backdrop of eight fewer festive days in Q3FY23, compared to Q3FY22. Especially heartening is the rebound of Nykaa Fashion," Nayar said. 

The company has expanded into 141 offline stores across 56 cities in the country and 40 fulfillment centres. 

"There's been a structural improvement in fulfilment expense as we move to regional warehouses. Our marketing efforts are focussed on order-conversion ratio, rather than chasing visits alone," said Nayar. 

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While majority shareholding in the company lies with the Sanjay Nayar and Falguni Nayar family offices, Nykaa also counts investors such as Kravis Investment Partners, Fidelity, Lighthouse, TPG and Steadview Capital as a part of its captable.

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