Beauty and fashion ecommerce major Nykaa’s consolidated net profit jumped 50% to INR 7.8 Cr in the September quarter (Q2) of the financial year 2023-24 (FY24) from INR 5.2 Cr in the last year’s quarter, helped by growth across business verticals and cost control measures.
Even on a sequential basis, the net profit grew 44.4% from INR 5.4 Cr in Q1 FY24.
Meanwhile, operating revenue grew 22.4% to INR 1,507 Cr in the reported quarter from INR 1,230.8 Cr in Q2 FY23. It also increased on a quarter-on-quarter basis from INR 1,421.8 Cr.
In a statement, Nykaa said “the quality of its business” continues to witness improvements. EBITDA margin expanded to 5.4% in Q2 FY24 on the back of both direct and indirect cost efficiencies, it added.
However, Nykaa’s gross margin as a percentage to revenue from operations contracted 221 basis points YoY. It was stable on a sequential basis.
Nykaa’s overall gross merchandise value (GMV) increased 25% YoY to INR 2,943.5 Cr in Q2 FY24. This was also a 10.3% increase compared to INR 2,667.8 Cr reported in the prior quarter.
Nykaa said its consolidated GMV in the beauty and personal (BPC) category grew 23% YoY to INR 2,001.6 Cr during the quarter under review. In Q1 FY24, the BPC major’s GMV for the segment stood at INR 1,850.8 Cr.
The company said that the festive season is a big driver of consumption in the beauty category and a shift of around 20 days in the festive calendar impacted some growth in the BPC category in Q2.
Meanwhile, discounting in the vertical also increased in the quarter, which Nykaa attributed to the increasing proliferation of home-grown and international brands.
The net sales value (NSV) of Nykaa’s BPC vertical grew 19% YoY to INR 1,167.5 Cr in Q2 FY24.
Nykaa’s “Hot Pink Sale” event held in July this year also resulted in a strong engagement. The sales witnessed over 18 Mn visits with an order to visit conversion of 1.3%, it said.
CEO of beauty and ecommerce of Nykaa Anchit Nayar, during the company’s post-earnings call, said Nykaa witnessed a trend of increasing interest towards Korean beauty brands in the September quarter.
On the other hand, Nykaa’s fashion vertical also saw strong growth in Q2. GMV grew 27% YoY to INR 762.8 Cr. In Q1 FY24, the GMV of Nykaa’s fashion vertical stood at INR 653.7 Cr.
Nykaa’s Cost-Control Measures
Nykaa was able to reduce employee costs, spending towards purchase of traded goods, and cost of material consumed on a QoQ basis in the September quarter. In the post-earnings call, Nykaa said cost optimisation and cost control resulted in a strong uptick in its profit margins.
The beauty ecommerce major spent INR 136.3 Cr towards employee benefits in Q2 FY24, down from INR 138.6 Cr in the June quarter. As a result, Nykaa’s employee expenses as a percentage of revenue fell to 9% from 9.7% in Q1 FY24. On a YoY basis, this fell from 9.9% posted in Q2 FY23.
Nykaa’s cost of materials also declined 16.7% sequentially to INR 15.5 Cr in Q2 FY24.
On the other hand, the company’s expenses towards the purchase of traded goods fell 43.5% QoQ to INR 553 Cr in the reported quarter.
However, Nykaa’s marketing and advertising expenses increased 25% YoY and 6% QoQ to INR 169 Cr in Q2 FY24. But the expenses in this bucket as a percentage of revenue remained unchanged QoQ at 11.2%.
The company’s selling and distribution expenses also increased 16% YoY and 7% QoQ to INR 34.6 Cr.
Meanwhile, Nykaa said that its regionalisation strategy, as part of which it expanded its warehouse locations and capacity in FY23, led to reduction in its fulfilment expenses as a percentage of revenue in Q2 compared to the year-ago quarter.
Nykaa’s fulfilment expenses stood at INR 145.9 Cr in Q2 FY24 as against INR 145.4 Cr a year ago.
Overall, the company’s total expenses increased 5.9% sequentially and 22.3% YoY to INR 1,502.3 Cr in Q2 FY24.
Shares of Nykaa ended today’s trading session 5.1% higher at INR 147.45 on the BSE.
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