Nykaa's Beauty Business Beats Expectations, but Margins Remain a Concern
MUMBAI, NOVEMBER 18, 2024: Nykaa Ltd., one of India's leading beauty e-commerce platforms, reported strong growth in its sales business on Monday, despite margins being a major area of concern.
The company saw a significant rise in orders and revenue, driven by an increasing demand for beauty products, particularly after the relaxing of COVID-19 restrictions. According to Nykaa's quarterly earnings report released late Sunday, the retailer's sales soared 26% year-on-year (YoY) to Rs 8,155 crores.
This growth, however, was not enough to compensate for widening margins, which expanded 150 basis points (bps) YoY to 25.9%, impacting net profit. The reported YoY net loss of Nykaa narrowed down to ₹2,500 crore against a whopping loss of ₹4,200 crores witnessed in the same period a year ago.
For market analysts, the mixed results were an indicator of both the growth potential and challenges that Nykaa would face going forward. According to some traders, despite increasing its user base significantly post-pandemic period, competition from other platforms continued to pose a major challenge for the e-commerce platform. Furthermore, as retail inflation rises in India this year, costs are likely to further increase, squeezing margins.
In related news, shares of Nykaa slipped by 3 percent on Monday, making it one of the biggest declines among Indian midcaps that report earnings before the opening of markets. However, some analysts remained optimistic about the company’s growth prospects, while warning that rising costs and margins had to be closely watched going forward.
Stocks of other beauty companies, including L'Oréal-owned L'Oreal India, and Cosmetics manufacturer Procter & Gamble Fabinda Group Ltd., were in the spotlight, with some trading at their highs today, benefiting from optimism about Indian growth prospects. This positivity was tempered by increasing volatility across global markets, led by escalating tensions between Russia and Ukraine.