Fsn E-Commerce Ventures Ltd Q3 FY24 Earnings Conference Call Insights

Key highlights from Fsn E-Commerce Ventures Ltd (NYKAA) Q3 FY24 Earnings Concall

• Quarterly Performance
  • Nykaa saw 29% GMV growth to INR 3,620 crore and 24% NSV growth to INR 17,866 million in Q3 FY24.
  • Gross profit grew 20% to INR 7,600 million with 42.5% margins.
  • EBITDA grew 26% to INR 988 million with 5.5% margins.
  • PAT grew 106% to INR 175 million with 1% margins.
  • Beauty GMV grew 25% and NSV 20% in Q3 FY24.
  • Fashion GMV and NSV grew 40% and 31% respectively.
  • Other business GMV (includes Nykaa Man and Superstore) grew 39% and NSV 67%.
  • Superstore GMV specifically grew 68%.
• Increasing Diversification
  • Beauty contributed 78% NSV, Fashion 15% and Others 7% in Q3 FY24.
  • All 3 business verticals seeing healthy growth rates.
  • Addressing $10 billion online, $9 billion modern trade and $12 billion unorganized offline opportunity in beauty and personal care.
  • Nykaa also addressing $49 billion online fashion opportunity.
• Margin Trends and Growth Drivers
  • Lower gross margins due to higher discounting across beauty companies.
  • Improved EBITDA and bottom-line margins showing operating leverage.
  • Grew store count by 80 to 174 stores across 64 cities in 2 years.
  • Retail segment seeing 35% YoY EBITDA growth.
  • Contributes 9% of overall GMV currently from 80 brands.
  • 65%+ GMV from premium brands; productivity at INR 4,109 GMV per sq. ft. per month.
  • Longer term AI and tech automation could drive significant cost savings.
  • Future margins could be higher as technology matures.
  • Not targeting higher margins near term.
  • Objective is not to aggressively push contribution margins higher now.
  • Will continue investing in market creation and faster deliveries.
• Sales Trend
  • 7-day flagship sale executed across online and 80 offline stores.
  • GMV increased 10X over 5 years; 1/3rd from premium brands this year.
  • 50 million visitors across platforms during sale week.
  • GMV increased 5X over 2 years during Pink Friday sale.
  • 29% jump in order conversion rate.
  • 120%+ growth in Women’s Western Wear GMV.
• Foot Locker Partnership
  • Partnering as exclusive e-commerce platform for Foot Locker India.
  • To capitalize on growing sneaker trend in India, $4.5B market by 2027.
  • Will offer footwear, apparel and accessories from top sports brands.
• Owned Beauty Brands Growth
  • 13 owned beauty brands, 3 have hit scale of INR 200-500 crores revenue.
  • Delivered INR 315 crores GMV in Q3, 34% 2-year CAGR.
  • Contribute 13.3% of overall BPC GMV.
  • Over one-third sales from other 3rd party channels beyond Nykaa.
  • Overall strong double digit growth in both industrial businesses.
  • Aiming to build strong owned brands in fashion catering to customer needs.
  • Delivered INR 116 crores GMV in Q3, 60% 2-year CAGR.
  • 46% sales from other 3rd party channels.
• eB2B Business
  • GMV grown over 31x and NSV over 40x in 2 years.
  • Transacting retailers increased 35x to 337K; orders up 38x.
  • Reduced leakages by 40% between GMV and NSV.
  • Contribution margins improved 580 bps driven by lower fulfillment, packaging and sales costs.
  • Nykaa expanding warehouse footprint to improve service levels.
  • Expanded from 10 to 13 warehouses covering 950 cities now.
  • Added new warehouses in Patna, Chennai and Bangalore.
  • Total warehouse space at 2.5 lakh sq. ft. across India.
• Discounting Trends and Impact
  • Mass/Masstige brands increased discounts to drive short-term growth.
  • Resulted in some marketing spend getting shifted to promotions.
  • Own brands also increased discounts like others in environment.
• Increasing Marketing Spend
  • Not related to own brands discounting.
  • Investing in category building events like Nykaaland.
  • Strategic priority to acquire new beauty customers.
  • Taking advantage of festive season traction.
• Rural Softness
  • Slowdown noted by listed mass beauty players in rural areas.
  • Resulting in urgency to drive short-term growth via discounts.
  • Likely a temporary issue which should recover.
• Market Share
  • Believe Nykaa has maintained or grown market share despite new competition.
  • Seeing similar growth rates to overall online BPC market.
  • Also gaining offline market share with store expansion.
• Growth Opportunities
  • Sees premium beauty growing fastest in beauty segment.
  • Huge opportunity remains in mass/masstige segments
  • Focus on acquiring new beauty consumers and increasing purchase frequency.
  • Personal care consumers moving into beauty is a big opportunity.
  • Plan to reinvest contribution margin gains into growth initiatives.
  • Opportunity for investment in marketing and consumer acquisition.