- Nykaa is down more than 40% since the peak of the quotation.
- From Nykaa’s perspective, we acquired almost 6 million new customers this year
- Nykaa has grown and this scale now allows us to be closer to our customers in regional warehouses
New age companies say they are focused on hyper-growth rather than quarter-to-quarter living. In fact, since its IPO, Nykaa has reported declining earnings in all three quarterly newsletters since the IPO.
Q: Why has Nykaa’s net profit almost halved compared to last year?
Reliance Retail enters the beauty and cosmetics segment and opens nearly 400 stores
From Nykaa’s perspective, we had almost 6 million new customers acquired this year and that represents around 4.4 million new customers acquired in beauty and around 1.6 million in fashion. This has been a big investment that we are making for the future and which also reflects a slight erosion in EBITDA.
EBITDA is 200 basis points lower and part of it is due to this increased marketing that we have undertaken during the year. On the execution side, our costs are slightly unfavorable, but here we have seen unfavorable costs due to rising fuel prices.
As you know, supply chain logistics was an issue and we invested in regional warehouses. About three to four are coming now and there will be more coming. And, thanks to this regional warehouse structure, Nykaa has grown in size over the last two or three years.
Nykaa has grown and this scale now allows us to be closer to our customers in regional warehouses from which we have achieved three things. We have achieved faster delivery of parcels to our customers. They don’t need the shipment to be airmailed and that cuts costs and thirdly of course we have greater regional availability and that also allows us to stock even heavy products closer to customers.
So in many ways we have the ability to be in regional warehouses. This is going to allow us to put more emphasis on our BPC business, what we call the personal care business.
Q: Just a quick note on the stock price. You were an investment banker and I’m sure you were also convinced at some point that valuations are a slave to earnings. But we have seen Nykaa’s net losses increase in all three quarterly results since the IPO. The stock price is down more than 40% from the peak of the quotation. What do you have to say to retail investors and when and when do you see it all backfired?
I want to remind you that Nykaa stock price is up from its IPO price even today. This is the listing pop from which some decline in the share price has occurred, but Nykaa continues to be in positive territory even from an IPO price.
So comparing with the COVID year is a bit difficult because in the COVID year, for the first quarter or two, we really had a lot of adversity where we could only do essential business and that didn’t did not make you want to invest.
Fashion is therefore an important part of our business, it is doing well now. We have improved the economy of our unit and we continue to want to do so. In fact, this year we gave a lot of data to our investors because before our data was a mix between the beauty and fashion numbers, now we have stated the beauty and fashion numbers separately so that investors can see how each of the business unit’s economy is developing.