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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.
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