Nykaa’s Q4 net profit slips 72% YoY to ₹2.4 crore as expenses mount

• Nykaa’s Q4 expenses grew by 33% on a year on year basis.
  
• Its profit margins for Q4 came in at 0.2%, falling by 60 basis points on a YoY basis.
  
• In Q4, its gross merchandise value grew 36% on a YoY basis to ₹2,445 crore.
  

FSN E-commerce Ventures that operates Nykaa posted a 72% YoY decline in Q4 net profit to ₹2.4 crore — as compared to a net profit of ₹8.6 crore posted in the same quarter last year.

Its total income increased by 33.8% ₹1,302 crore as compared to ₹973 crore in the same quarter last year. The revenues have come in line with Nomura’s analyst expectations of ₹1,310 crore — which had priced in a 10% sequential decline.

“Profit after tax is less healthy than expected due to many factors like tax planning and others. Also, the fourth quarter is a seasonally weak quarter as compared to the third quarter,” Falguni Nayar, the MD and CEO of Nykaa said during an investor presentation.

The company said in its investor presentation that its EBITDA margins stood at 5.4% for the quarter, and went up by 147 basis points on a year on year basis. Its profit margins however came in 0.2% which fell by 60 basis points.

“The difference between PAT and EBITDA margins is due to our investments,” Nayar said during the presentation. EBITDA stands for earnings before interest, taxes, depreciation, and amortization.

For the fourth quarter, Nykaa’s gross merchandise value or GMV grew 36% on a YoY basis to ₹2,445 crore. But its expenses shot up by 33% ₹1,302 crore on a year on year basis, and Nayar admitted on the concall that they have been out of control.

“There has been some lack of focus on employee and other expenses. We have been cognisant of the fact and working towards it. Though we will keep rolling out of a certain number of stores, on the current base the growth will be low,” Nayar said answering questions in the concall.

For all of FY23, its revenues grew 36% to ₹5,174 crore from ₹3,800 in FY22. Its net profit however halved on an annual basis to ₹20.9 crore from ₹41.2 crore in the last financial year.

The company’s GMV for FY23 grew by 41% to ₹9,743 crore.

Fashion business mix grows, albeit slowly

Nykaa claimed that its investments in the fashion business are paying off, as the mix of fashion sales in total sales went up to 26.4% for FY23 from 25.3% in FY22.

Beauty and personal care sales (online) however accounted for the biggest chunk of sales – coming in at 68.4%.

Nykaa’s annual unique transacting customers went up to 13 million in FY23 as compared to 10.3 million in FY22. Its cumulative customer base stood at over 24 million for the financial year.

The company also expanded its physical presence and now has 1.4 lakh square feet of retail space. Its warehouse space too stands at 14.6 lakh square feet. “We will keep growing our retail presence but we are close to the end of the cycle on warehouse investments,” said Nayar.

The company’s other business which also includes Nykaa Man – exhibited a 204% year on year growth in FY23.