Nykaa: Fashion glows, beauty dims
FSN E-Commerce Ventures Ltd, the parent company of Nykaa. This vertical put up a strong show on the margin front in the September quarter (Q2FY24), thanks to premiumization, lower product returns and declining marketing expenses. As such, the fashion segment clocked a multi-quarter high contribution profit margin (as a percentage of net sales value) of 4.7%.
In Q1, this measure stood at 2.7%. Contribution profit refers to gross profit after adjusting variable expenses such as fulfillment expenses, marketing costs and selling & distribution expenses. What’s more, the fashion segment is expected to stay in vogue with better margin trajectory.
This would be aided by an improving mix of existing customers and would lead to savings on marketing costs. Existing customers formed 46% of the fashion segment’s gross merchandise value (GMV) in Q2 versus 35% in the same period last year. “We expect the segment to turn Ebitda profitable as contribution margin crosses 11%.
It appears that the segment has turned a corner and is on track to generate incremental value for shareholders," said analysts at JM Financial Institutional Securities in a report on 6 November. Ebitda, a measure of profitability, is short for earnings before interest, tax, depreciation and amortization. However, it is not a pretty picture as far as Nykaa’s mainstay beauty and personal care (BPC) segment is concerned.
Competition is heating up in this category, led by direct-to-consumer brands as well as international brands that operate on Nykaa’s platform. In a bid to hold on to market share, the brands are offering additional discounts, which is weighing on Nykaa’s margin. Further, ad revenue is yet to rebound even though it has shown sequential improvement in
. Read more on livemint.com
