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.