Eyewear over the last few years has gone from being a symbol of ‘nerds’ to the symbol of ‘cool’ for millennials. While the trend has been mostly because of sunglasses, the cool factor has made spectacles a style symbol too. The Indian eyewear industry is poised to become an industry worth INR 1700 Cr by 2021. The buzz has been leveraged by eyewear etailer Lenskart, which has grown exponentially since its launch in 2010.
The company, in its filings, says it is engaged in retail trading of eyewear products including eyeglasses, sunglasses, and contact lenses. This is coupled with its online presence, which has also seen huge brand growth.
The company has so far raised $129.6 Mn from investors such as TR Capital and Zurich-based asset management company Adveq among others. Being an omnichannel retailer, Lenskart has over 460 stores across India and is aiming to open 150 more stores by March 2020, and another 2K stores over the next five years.
However, in the financial year ending March 31, 2019, the company’s profits saw a fall while revenue and expenses grew almost similarly at a 24% rate Y-o-Y. In FY19, the company’s net profit fell to INR 8.76 Lakh from INR 2.36 Cr in FY18, a 96% Y-o-Y fall.
One examining the company’s filings details, we noted that this was because of taxes. To be noted, the company’s gross profit fell to INR 1.74 Cr from INR 2.36 Cr in FY18, which is a 26% Y-o-Y fall. So, even though the company’s profits have declined, the large decline in net profit is due to the minimum alternate tax credit the company got last year but not this year.
However, other impact on the revenue, expenses and profits can be attributed to the “transfer of its business relating to Customer Support Services and Home Eye Check Up to Lenskart Solutions Private Limited on a slump sales basis, as a going concern, along with the assets and liabilities with effect from April 1, 2019 for a consideration of INR 10,150,000 and INR 62,100,000 respectively.”
However, this is expected to show a full impact in FY20, so we examine how the company’s revenue and expenses grew proportionately but profits fell.
Lenskart’s Revenue Journey
The company filings showed that Lenskart’s revenue from the sale of products is INR 460.67 Cr this year, a 0.9% Y-o-Y growth from FY18. Further, from the sale of services it earned INR 64.19 Cr in FY19, 70X Y-o-Y growth. However, the company saw a 22% decline in its other operating revenues which came to INR 10.31 Lakh in FY19.
Lenskart didn’t respond to Inc42 queries on the matter till the time of publication.
Lenskart’s Training, Recruitment Costs Inflate Expenses
Lenskart has been expanding its product portfolio aggressively through various investments and tie-ups. In the last one year, the company partnered with California-based Ditto to launch 3D Try-On, a feature that enabled people to try on frames virtually. Further, it invested $500K in a US-based startup ThinOptics, which makes innovative reading glasses that can be attached to a user’s phone or keychain, so the user doesn’t misplace them.
In April 2019, it launched a new app called Lookr, which uses face mapping, facial analysis, design predictions and frame recommendations to help customers choose their product.
The company’s expenses for FY19 showed that the company’s costs for stock fell to INR 250.83 Cr in FY19 from INR 274.47 Cr in FY18. Further, the company increased its training and recruitment costs by 3.73X reaching INR 19.64 Lakh.
Interestingly, the company’s advertising and promotional expenses fell 40.3% reaching INR 13.48 Cr from INR 22.58 Cr last year.
With eyes set on joining the unicorn club with the next funding round, Lenskart’s journey to continue revenue growth faster than expenses will be an interesting watch.