Consolidated net profit for the Mumbai-based company rose 66% to Rs 13 crore in the quarter ended September 30.
Gross merchandise value (GMV) rose 24% to Rs 3,652 crore. Within this, the beauty vertical posted a 29% increase in GMV to Rs 2,783 crore, driven by a 31% rise in new customer acquisition.
The company is making deliveries quicker without significant investments that could affect profitability or revenue margins, Anchit Nayar, chief executive of Nykaa Beauty, told analysts during a post-earnings call. Nykaa’s high order value will allow this quick-delivery segment to remain profitable without diluting margins or requiring large capital outlays, he said.
The company has a segment within its assortment called ‘fast-moving everyday stock-keeping units (SKUs)’, primarily consisting of essential beauty products which Nykaa is focusing on delivering within a 30-minute to three-hour window, Nayar said.
On October 9, ET reported that Nykaa launched a quick-delivery pilot at Borivali in Mumbai, in response to the rapid expansion of quick commerce which is beginning to disrupt multiple product categories.
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In the second quarter, 70% of Nykaa’s orders in the top 110 cities were delivered on the same or next day, with 80% meeting this standard in the top 12 cities, the company said.Nykaa’s fashion segment showed a more modest GMV growth of 10% in the July-September period. The company attributed the slower performance to key festivals falling in the second half of the year. Festivals are typically a major growth driver for fashion products.
“On beauty, we had a strong first half and the growth momentum has only accelerated in the second quarter… On fashion, the growth has been slower as fashion had a little bit subdued first half and from a seasonality perspective as well as unique reasons. This year the fashion demand was a little bit subdued due to more festivals being in the second half,” said chief executive Falguni Nayar.
Nykaa said it now has a cumulative user base of 37 million across all its businesses and offers over 6,800 brands on its platform.
Also Read: Quick commerce is taking demand from neighbourhood stores: Nykaa’s Falguni Nayar
Discussing discounting trends in the brand space, Anchit Nayar said brands have effectively moderated their discounts, focusing instead on brand building through advertising and marketing. However, he noted increased retailer-funded discounting on horizontal platforms, particularly in beauty, due to softer demand in categories like fashion.
“Brands are against the concept of retailer-funded discounting on their products, because in the long term that tends to commoditise that category. They are already looking to moderate their discounts and have already moderated the discounts meaningfully. I don’t know when the horizontal platforms will stop that and how long they will be able to sustain this. It is not a very good practice for the industry,” he said.
Nykaa made a capital expenditure of Rs 53.9 crore during the quarter, with 47% allocated to technology enhancements and 38% to retail expansion. The company noted the shift in its investment focus from FY22 and FY23, when significant capex investments were made in office spaces and improving warehousing capacity.
The acquisition of LBB, Nykaa’s content platform business, is driving faster revenue growth for its fashion segment, the company said.
Nykaa’s shares closed 2.66% lower at Rs 177.65 on the BSE Tuesday. The results were released after market hours.
