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Nykaa Faces Profit Decline of 71 percent to Rs 2.4 Crore, Yet Achieves Impressive 33 percent Revenue Growth in Q4
Nykaa's Revenue Shines Bright, Despite Profit Plunge in Q4 Financial Results
25 May 2023
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Kunal Tyagi
Nykaa's profit in the fourth quarter dropped by 71% to Rs 2.4 crore due to increased expenses, a slowdown in consumer spending, and stagnant demand for fashion and beauty products.
Despite the decline in profits, Nykaa experienced a 33% revenue growth, reaching Rs 1,301 crore in the same quarter.
The company focused on offline expansion, acquiring stakes in Earth Rhythm, Nudge Wellness, and Iluminar Media, while also expanding its physical store footprint in the beauty and personal care segment to 60 cities.
Beauty retailer Nykaa recently released its financial report for the fourth quarter, revealing a sharp decline in profits. The company's profit plummeted by 71% to Rs 2.4 crore compared to Rs 8.5 crore in the previous year. This significant downturn was attributed to increased expenses, a slowdown in consumer spending, and stagnant demand for fashion and beauty products. Despite the challenging circumstances, Nykaa experienced notable revenue growth of 33%, reaching Rs 1,301 crore in the same quarter.
Nykaa's expenses in the fourth quarter rose by 33% to Rs 1,302 crore, significantly impacting the company's bottom line. The costs of offline expansion, including the establishment of retail stores and warehouses, contributed to the increased expenses. Furthermore, a tax expense of Rs 4.4 crore further burdened the company's profitability. The quarter also witnessed lower consumer demand compared to the previous period, which had been driven by festive discounts and events.
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During the fiscal year, Nykaa made strategic acquisitions, acquiring stakes in Earth Rhythm, Nudge Wellness, and Iluminar Media. Despite the decline in profits, the company's overall gross merchandise value (GMV) experienced a 36% year-on-year growth, reaching Rs 2,445 crore in the fourth quarter. The beauty and personal care segment, Nykaa's largest category, achieved a quarterly GMV growth of 29% to Rs 1,628 crore, contributing significantly to the company's overall performance.
Nykaa is leveraging various strategies to stimulate growth and navigate challenging market conditions. The company expanded its physical store footprint in the beauty and personal care segment, extending its reach to a total of 60 cities. This move resulted in a remarkable 67% growth in offline retail GMV. Additionally, Nykaa is focusing on its house of brands model, akin to a private-label strategy, to drive revenue growth.
Despite the decline in profits, Nykaa reported a 36% increase in revenue for the financial year, amounting to Rs 5,143 crore. The average order value (AOV) remained stable at Rs 1,857, while order volume increased by 31% to 3.4 crores. Anchit Nayar, CEO of Nykaa's beauty and personal care segment, identified four key factors driving growth in the segment: increased per-capita beauty consumption, a shift from personal care to beauty, a transition between online and offline formats, and the adoption of an organized e-commerce system.
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