Omnichannel beauty and fashion platform Nykaa has reported a significant boost in its Q2 FY25 financial results, with revenue increasing by 24.4% year-on-year, driven by strong growth across its beauty and fashion segments.
Strong Performance Driven by Beauty and Fashion
For the quarter ending September 2024, Nykaa’s revenue from operations reached Rs 1,874.74 crore, compared to Rs 1,507 crore in Q2 FY24. This growth highlights the company’s solid position in India’s beauty and fashion e-commerce market, with a remarkable increase in profits to match. The company’s profit surged by 66.3%, reaching Rs 12.97 crore, up from Rs 7.8 crore during the same period last year.
The beauty segment, which remains Nykaa’s dominant revenue driver, contributed a staggering 91% of the total operating revenue. This segment saw a 24.56% year-on-year increase, generating Rs 1,705.89 crore. On the other hand, the fashion segment, while still growing, did so at a slightly slower pace. It recorded a 21.68% growth, with Rs 166.09 crore in revenue during the quarter.
Additionally, Nykaa recorded an extra Rs 5.3 crore in other income, bringing the total income for Q2 FY25 to Rs 1,880 crore. The company’s strong performance underscores the continued demand for both beauty and fashion products, with a growing preference for Nykaa’s expansive portfolio.
Private Label Success and Investments
Nykaa continues to expand its reach by offering a variety of private labels across multiple categories, including skincare, jewelry, and apparel. Some of its top private label brands include Dot & Key, Earth Rhythm, Pipa Bella, Gajra Gang, and Kica. These brands play a crucial role in driving the company’s overall growth, further establishing Nykaa as a leading player in the Indian omnichannel marketplace.
In line with its growth strategy, Nykaa increased its stake in Dot & Key to 90% in Q1 FY25 through an investment of Rs 265.3 crore. This move reflects Nykaa’s commitment to strengthening its private label portfolio, which is expected to yield long-term returns.
Rising Costs Impact Profit Margins
While Nykaa experienced impressive revenue growth, the company’s expenses also saw a significant rise during the quarter. Total expenses increased by 23.74%, reaching Rs 1,858.93 crore, compared to Rs 1,502.33 crore in Q2 FY24. A key contributor to this rise was the cost of materials, which grew by 22.9% to Rs 1,053.72 crore, making up 56.68% of the total expenses.
Employee benefits costs increased by 18.46% to Rs 161.49 crore, reflecting the company’s investments in talent to support its growth. Depreciation expenses also climbed by 16.46% to Rs 63.62 crore. Additionally, Nykaa incurred Rs 580.1 crore in other undisclosed costs, further impacting its profitability.
Despite these rising expenses, Nykaa was able to maintain a strong profit margin, with its Return on Capital Employed (ROCE) standing at 2.88% and its EBITDA margin at 5.8%. On a unit basis, Nykaa spent Rs 0.99 for every rupee of operating revenue.
Competing in a Crowded Market
Nykaa continues to face stiff competition from major players in the beauty and fashion e-commerce sectors, including giants like Amazon, Flipkart, and Myntra, as well as niche platforms like Purplle. Despite the competition, Nykaa’s ability to consistently increase its revenue and maintain profitability speaks to the strength of its brand and the loyalty of its customer base.
As of the latest market data, Nykaa’s market capitalization stood at Rs 51,151 crore, and its stock was trading at Rs 179.01 per share at the close of the stock exchange.
Nykaa’s growth trajectory remains promising, but the company will need to navigate increasing competition and rising costs while continuing to deliver on its omnichannel strategy. How it adapts to the evolving market dynamics will likely shape its next phase of growth.
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