Nykaa Q3 Highlights: Offline Expansion Continues; Discounts, Lower Spending Hit Profit

The third quarter (Q3) of the financial year 2022-23 (FY23) turned out to be a mixed bag for beauty ecommerce platform Nykaa. Inflationary pressure and slowing discretionary spending hurt the company’s bottom line even as operating revenue registered an impressive growth. 

The listed beauty ecommerce platform released its financial results for the quarter ended December 2022 on Monday (February 12). Here are the key highlights:

Headline Numbers: Inflationary pressure played a spoilsport for Nykaa as its consolidated net profit plunged more than 70% year-on-year (YoY) to INR 8.5 Cr in the third quarter of the financial year 2022-23. 

However, festive season helped the ecommerce giant notch 33.2% higher operating revenue at INR 1,462.8 Cr in the quarter under review. 

EBITDA surged 13% to INR 78.2 Cr in Q3 FY23 from INR 69 Cr reported in the year-ago period. However, EBITDA margin contracted 94 basis points (bps) YoY to 5.3% in Q3 FY23. 

Gross merchandise value (GMV) rose 37% to INR 2,796 Cr from INR 2,042.8 Cr in the quarter ended December 2021.

“Gross margin declined due to change in BPC category mix, higher brand funded discount during festive season, consumer downgrades,” the company said. 

BPC Stays The Dominant Force: Driven largely by evolving consumer preferences, Nykaa saw its BPC GMV soar 26% YoY to INR 1,901.4 Cr in Q3 FY23, contributing 68% to the total GMV. While existing customers contributed 76% of the BPC GMV, new users accounted for the rest. 

Number of online visits to the BPC websites and platforms rose 13% on a yearly basis to 25 Cr in the quarter under review, while monthly average unique visitors (MAUV) grew 22% YoY to 2.42 Cr. 

Number of orders also rose 26% YoY to 95 Lakh, while average order value for the BPC segment fell by a marginal 0.4% to INR 1,958 in Q3 FY23. 

The platform hosted more than 3,000 brands on its BPC websites. Among the top players in terms of Q3 FY23 GMV, 22 were International brands, 17 were FMCG players while 32 were D2C brands. 

Nykaa-owned brands contributed INR 224.7 Cr or nearly 12% to the total BPC GMV of the listed company.

Fashion Segment Sees Traction: Nykaa’s fashion vertical saw a big uptick across all key metrics. Its GMV stood at INR 724.4 Cr in Q3 FY23, up 50% from INR 484.1 Cr in Q3 FY22. 

In the quarter under review, Nykaa’s fashion segment accounted for 25.9% of the total GMV, an improvement of 220 basis points from the year-ago period. 

Annual unique transacting users for the fashion segment grew to 24 Lakh in the quarter ended December 2022 compared to 16 Lakh in Q3 FY22. 

The fashion space also saw an uptick in numbers across all other operational parameters. The fashion website saw 13.7 Cr visits and an MAUV of 1.94 Cr in the period under review. Number of orders placed rose 48% YoY to 13 Lakh, while AOV (in terms of MRP) surged 5% YoY to INR 4,570.

Women were the biggest buyers on Nykaa Fashion. The vertical hosted nearly 2,700 clothing brands, including 600 global brands, on its website. 

Nykaa-owned fashion brands contributed 90.1 Cr, or 12.4%, to the total fashion GMV in Q3 FY23. 

B2B Vertical Scales Up: Nykaa’s B2B platform, SuperStore, which was launched last year, saw rapid adoption. Transacting retailers grew to 92,415 in Q3 FY23, with an activation rate of 69%.

Number of brands listed on SuperStore also jumped to 185, while the platform expanded service to 652 cities at the end of the quarter. Number of orders placed on the B2B vertical also grew manifold to 2.16 Lakh in the period under review. 

Offerings such as NykaaMan, SuperStore, international and new brand acquisitions contributed 2.4% to the overall GMV in Q3 FY23, while it cumulatively attracted 5 Lakh annual unique transacting customers over the course of the quarter. 

Ramping Up Offline Stores: At the end of December 2022, Nykaa operated 141 physical stores across 56 Indian cities, up 35% YoY. These stores occupied a total area of 1.3 Lakh square feet and generated a GMV of INR 3,898 per sq. ft./ month.

Nykaa also grew the number of fulfilment centres to 37 across 15 cities, covering an area of 12 lakh sq. ft.

Nykaa distributed its beauty products through a channel of 2,405 general trade stores and 149 modern trade stores in the quarter under review. It also served 4,000+ beauty retailers through eB2B vertical in Q3FY23.

“There’s been a structural improvement in fulfilment expense(s) as we move to regional warehouses. Our marketing efforts are focussed on order-conversion ratio, rather than chasing visits alone, which is reflective of the highest ever conversions of 3.8% in BPC, and 1.2% for Fashion in Q3 FY23,” said Nykaa’s executive chairperson, MD and CEO Falguni Nayar.