Nykaa Sees Traction Across In-House Beauty, Fashion Brands In Q3 FY23

More than a year-and-a-half after Nykaa’s top executive Falguni Nayar first announced that the startup would become a house of brands, the Q3 FY23 financials finally gave a sneak peek into how that promise is shaping up. 

What featured boldly on Nykaa’s the quarter’s pitch was its bid to create, acquire and scale a ‘portfolio of independent and new age consumer-first brands.’

The financial reports revealed that Nykaa-owned BPC brands contributed INR 224.7 Cr to the startup’s total gross merchandise volume (GMV), up 29% YoY from INR 174.6 Cr reported in the year-ago period. In the nine-month period ended December 2022, Nykaa’s in-house BPC brands generated a GMV of INR 587.6 Cr against INR 380 Cr reported in the corresponding period last year. 

In terms of percentages, Nykaa’s beauty brands contributed nearly 12% to the listed company’s BPC GMV reported in Q3 FY23. Nykaa Cosmetics had an estimated annual GMV run rate of INR 250 Cr in Q3 FY23, while other in-house BPC brands such as Kay Beauty and Dot & Key had an annualised GMV run-rate of more than INR 120 Cr each. 

At the end of December 2022, the number of Nykaa owned-brands in the beauty category stood at 10. Besides, the active stock keeping unit (SKU) count for these 10 brands stood at more than 2,000. 

Q3 FY23 saw Nykaa scaling up the distribution of in-house BPC products to 2,554 general trade and modern trade stores, up 49% year-on-year (YoY) from 1,717 reported in the year-ago quarter. Of these, 2,405 were GT while 149 were MT outlets across India. In addition, Nykaa’s in-house BPC products were also sold to 4,000+ retailers via the eB2B vertical in the quarter under review. 

The period also saw a host of new launches in the BPC category ranging from fragrances to sunscreens and from body oils to lotions.

Nykaa Pushes In-House Labels

This trend of scaling up owned-brands also continued well into the fashion segment. From having just 8 in-house fashion brands in Q3 FY22, Nykaa ramped up the number to 12 at the end of December, 2022. The ecommerce giant also launched an Indian-wear brand, Nyri, during the quarter to cater to the growing demand in the space. 

Back to the story, Q3 FY23 saw big traction for Nykaa-owned brands, especially in the fashion segment. Nykaa-owned fashion labels generated a GMV of INR 90.1 Cr across in the quarter, up 2.2X from INR 40.6 Cr in Q3 FY22. On similar lines, GMV generated by Nykaa’s in-house fashion brands between April-December 2022 stood at INR 238.7, growing 2.6X compared to INR 90.6 Cr reported during the same period last fiscal year.

These Nykaa owned-brands contributed 12.4% to the fashion vertical’s total GMV in Q3 FY23. 

Twenty Dresses and Nykd by Nykaa emerged as some of the biggest in-house fashion labels on the platform. While Twenty Dresses had an annual GMV run-rate of INR 190 Cr+, Nykd by Nykaa had an annual GMV run-rate of INR 80 Cr at the end of Q3 FY23. 

Nykaa also ramped up the distribution of these House of Brands locally through the offline channel. As many as 24 new multi brand outlets (MBOs) retailed Nykaa’s two labels – Twenty Dresses and RSVP – at the end of the quarter, taking the total to 62 MBOs. 

Besides, Nykd by Nykaa also retailed at 247 general trade outlets in Q3 FY23 and also had a presence across two exclusive brand outlets (EBOs).

Meanwhile, Nykaa continued to unveil a slew of new offerings across its fashion and lifestyle brands. While Twenty Dresses launched 3,000+ new SKUs in Q3FY23, brands such as Pipa Bella and iykyk unveiled 1,500+ and 300 new SKUs, respectively. 

Overall, Nykaa saw its consolidated net profit tank more than 70% YoY to INR 8.5 Cr in Q3 FY23 against an operating revenue at INR 1,462.8 Cr in the quarter under review.

The strategy to evolve into a House of Brands will likely enable Nykaa to garner a higher chunk of revenues and cut the middleman (the manufacturer) itself. This has led to Nykaa undertaking a host of acquisitions in the past one year to shake up its operations and move from being just a multi-retailer brand. 

However, the same strategy appears to have bitten heavily into Nykaa’s profits. The startup’s gross margins were heavily hit owing to ‘higher brand funded discounts’ offered during the festive season. With Nayar herself noting, during the Q3 investors call, that declining discretionary spending was hitting the startup’s topline, inflationary pressures could weigh heavily for the company going forward.

While Nykaa’s focus continues to be on building a house of brands, all eyes are now on how well that pans out in the upcoming months amid a volatile 2023.