SUMMARY
Nykaa said that despite a slowdown in the overall discretionary spending, consumption in the beauty and personal care category remained strong during the June quarter
However, Nykaa’s apparel business, Nykaa Fashion, continued to face pressure and the company expects its net sales value to grow in the low- to mid-teens on a YoY basis in Q1
Decline in discretionary spending due to high inflation and higher competition has resulted in muted growth for Nykaa in the last few quarters
nykaa
expects its consolidated revenue to grow in the mid-twenties year-on-year (YoY) in Q1 FY24, the beauty and fashion ecommerce major said on Friday (July 7).
Nykaa, in its operating performance update for the June quarter, said that despite a slowdown in the overall discretionary spending, consumption in the beauty and personal care (BPC) category remained strong during the quarter on the back of the success of its flagship sale event ‘Pink Summer Sale’.
“Our BPC business NSV (net sales value) for the quarter is expected to grow in the early twenties YoY. This is supported by strong urban demand in the category,” the startup said in an exchange filing.
However, Nykaa’s apparel business, Nykaa Fashion, continues to face pressure. The company expects its fashion NSV for Q1 to grow in the low- to mid-teens on a YoY basis.
“Apparel industry has been impacted due to discretionary slowdown during the quarter, especially in small towns. We expect discretionary spending to improve with the revival of seasonal demand,” it said.
However, Nykaa also said that despite the larger category trend, the fashion business showed resilience during the quarter and saw improvement in order volume with sustained average order value (AOV) YoY.
Shares of Nykaa closed today’s trading session at INR 140.8, down 2.2% on the BSE.
Nykaa reported an operating revenue of INR 1,148.4 Cr in Q1 FY23, up 41% YoY. Meanwhile, its fashion vertical orders stood at 1.5 Mn during the quarter with an AOV of INR 4,357. On the other hand, its BPC vertical registered 8.1 Mn orders, while AOV declined about 3% YoY to INR 1,780 in Q1 FY23.
It must be noted that decline in discretionary spending due to high inflation and higher competition has resulted in muted growth for Nykaa in the last few quarters. In the last quarter, Q4 FY23, its net profit declined nearly 70% YoY to INR 2.3 Cr while operating revenue rose 33.7% YoY to INR 1,301.7 Cr.
While Nykaa’s BPC vertical has been growing strongly, Nykaa’s fashion segment has been struggling for the last few quarters. Nykaa Fashion’s gross merchandise value (GMV), AOV, Monthly Average Unique Visitors (MAUV), visits and order conversion saw a decline on a quarter-on-quarter (QoQ) basis in Q4 FY23.
However, Nykaa MD and CEO Falguni Nayar said that the fashion vertical is not chasing the highest possible growth but the “right growth” that doesn’t dilute what the platform has to offer in terms of “uniqueness”.
Despite the degrowth, several brokerages, including Jefferies, Kotak Institutional Equities, and JM Financial, have reiterated their bullish stance on the business. In fact, Jefferies said that Nykaa’s premiumisation trend plays well in its favour given the positioning of the platform.
As per MarkerScreener, the Street has a consensus estimate of INR 1,473 Cr on Nykaa’s net sales in Q1 FY24.
