Nykaa Q4 Highlights: Sharp QoQ Slowdown, Decline In Profit Eclipse YoY Growth

Beauty ecommerce major Nykaa reported a mixed set of financial results for the quarter and year ended March 2023 on Wednesday. 

While net profit declined sharply in Q4 FY23 as well as the full financial year 2022-23, key operational metrics posted an increase on a year-on-year basis during the quarter and year ended March.

However, these operational metrics registered decline on a quarter-on-quarter (QoQ) basis in Q4, highlighting the impact of slowing discretionary spending due to high inflation.

Here are the major takeaways from the company’s financial statements:

Headline Numbers: Nykaa’s net profit plummeted 70% YoY to INR 2.3 Cr in Q4 FY23 and 49% YoY to INR 20.9 Cr in the entirety of the fiscal year. In contrast, profit stood at INR 7.6 Cr and INR 41.3 Cr in Q3 FY23 and FY22 respectively. On a QoQ basis, net profit plummeted nearly 73% during the quarter ended March 2023.

Operating revenue declined 11% to INR 1,301.7 Cr in the quarter ended March 2023, down from INR 1,462.8 Cr in the previous quarter. 

Total income jumped 36% YoY to INR 5,174 Cr in FY23 from INR 3,800.9 Cr in the previous fiscal year. 

Expenses before interest, taxes, depreciation, and amortisation (EBITDA) rose 84% YoY to INR 70.7 Cr in Q4 FY23 but declined 10% QoQ from INR 78.2 Cr. EBITDA margin during Q4 FY23 inched up 147 basis points (bps) YoY. 

In FY23, EBITDA stood at INR 256 Cr, up 57% YoY, while EBITDA margin improved by 65 bps.

Gross merchandise value (GMV) rose 36% YoY to INR 2,445.4 Cr in Q4 FY23. However, it declined 12.5% sequentially. In FY23, GMV stood at INR 9,743.3 Cr, witnessing a steep growth of 41% from INR 6,933.2 Cr in the previous fiscal year.

Acknowledging ‘some inflationary pressures’, Nykaa executive chairperson, MD and CEO Falguni Nayar said during the company’s earnings call that she expects the trend to trail off this year. 

She also said that the platform is banking on premium users to fuel the demand for both online and offline verticals. 

BPC, Fashion Metrics Contract Sequentially: The beauty and personal care (BPC) segment continued to be the dominant force driving the business of Nykaa, contributing INR 1,628.9 Cr to its GMV in Q4 FY23. However, this was a sharp decline from INR 1,901.4 Cr reported in the previous quarter. 

This quarterly decline percolated across all major key metrics and segments. 

The fashion vertical’s GMV stood at INR 664.1 Cr in Q4 FY23, down 8% from INR 724.4 Cr in Q3 FY23. Other verticals, including NykaaMan and eB2B platform SuperStore, also saw a decline in GMV. 

User visits to Nykaa’s BPC platform declined to 231 Mn during the quarter under review from 250 Mn in Q3 FY23. Monthly average unique visitors (MAUV) to BPC vertical also saw a degrowth of 7% QoQ to 22.5 Mn in Q4 FY23. 

For the BPC segment, average order value (AOV) also fell to INR 1,803 in Q4 FY23 from INR 1,967 in Q3 FY23. On similar lines, orders generated by beauty and personal care brands also declined to 8.8 Mn in the quarter under review from 9.5 Mn in Q3 FY23. 

Barring AOV, a majority of key operational metrics of Nykaa’s fashion vertical also contracted.. While visits to the fashion vertical declined 7.3% QoQ to 127 Mn, MAUV fell 10% to 17.3 Mn. Orders logged by the fashion segment declined to 1.2 Mn in Q4 FY23 from 1.3 Mn in Q3 FY23. 

Annual Metrics Paint A Rosy Picture: Despite the QoQ decline in the March quarter, Nykaa’s annual operational metrics saw healthy growth across segments. 

GMV of the BPC segment rose to INR 6,649.1 Cr in the year under review, up 33% from INR 5,008.9 Cr in FY22. 

The fashion vertical’s GMV stood at INR 2,569.6 Cr in FY23, growing 47%. New businesses also saw a hefty 204% growth in GMV to INR 524.5 Cr in FY23 from INR 172.7 Cr in FY22. 

Visits to Nykaa’s BPC platforms rose 11% to 937 Mn in FY23, while traffic to the fashion vertical also grew 14% to 504 Mn. Visits to Nykaa’s new businesses (other verticals) rose 40% to 57 Mn in FY23. 

BPC AOV stayed flat at INR 1,857 in FY23, while AOV of the fashion vertical saw a 17% growth to rise to INR 3,973.

In the year ended March 2023, orders generated by Nykaa’s BPC vertical rose 31% to 34.8 Mn, while the same parameter for the fashion vertical rose 21% to 6 Mn. MAUV for the BPC platform surged by 21% to 23 Mn in FY23. The fashion vertical saw an MAUV jump of 14% to 17 Mn. 

Offline Expansion Continues To Be The Focus: Nykaa continued to scale up its offline presence in the country. At the end of FY23, its physical store area stood at 1.4 Lakh sq ft, witnessing a growth of 43% over FY22. The company’s warehouse capacity also surged 79% YoY to 14.6 Lakh sq ft at the end of March 2023. 

Nykaa’s online BPC platform listed more than 3,400 international and domestic brands. It also counted 145 beauty and personal care physical stores in more than 60 cities across the country which contributed INR 551.1 Cr in revenue. 

However the platform plans to cap the number of new physical stores that it intends to open in FY24 at 50.

The general trade and modern trade store count of Nykaa’s house of brands rose sharply to 2,749 at the end of FY23. These ‘owned brands’ raked up a GMV of INR 788.9 Cr for the beauty ecommerce giant. 

With 13 apparel brands, Nykaa’s owned brands contributed INR 331.3 Cr in revenue to Nykaa’s fashion vertical. 

Shares of the ecommerce platform closed 2.53% lower at INR 125.05 on the BSE on Wednesday (May 24). The company declared its results after market hours.\