Indian beauty retailer Nykaa is counting on premium brand partnerships and lower customer acquisition costs to lift margins at its fashion business, executives said on Wednesday, after second-quarter profit nearly tripled.
Nykaa Fashion is targeting EBITDA margins in the “high single digits by FY30 and then 10%-plus in steady state,” the unit’s chief executive Abhijeet Dabas said in an earnings call.
The company is using AI-enabled tools to target customers more precisely, while expanding its selection of premium brands to improve conversion rates and reduce customer acquisition costs, he added.
Nykaa has been pushing to make its fashion arm sustainably profitable as it competes with larger platforms such as Walmart-backed Myntra and Reliance’s Ajio, while its core beauty business is benefitting from demand for premium cosmetics.
Nykaa Fashion’s EBITDA for the quarter ended September 30 stood at 10 million rupees, compared with a loss of 120 million rupees a year earlier, marking its third consecutive quarter of positive EBITDA. Net sales value rose 47%.
Fashion customer acquisition costs fell 30% even as new customer additions increased 31%, aided by marketing efficiencies and a broader assortment of brands such as H&M and Nike, Dabas said.
Formally known as FSN E-Commerce Ventures, Nykaa posted a consolidated profit attributable to shareholders of 1.01 billion rupees ($10.66 million) for the quarter, compared with 344.3 million rupees a year earlier. Revenue rose 28.1% to 30.06 billion rupees.
Its EBITDA margin expanded to 8.7% from 6.8% a year earlier, supported by a higher contribution from in-house beauty brands, increased marketing income and improved operating efficiency.
Nykaa‘s beauty business recorded 28% growth in net sales value and a 51% rise in EBITDA.
Higher average order values reflected customers choosing more premium products rather than price increases, Nykaa Chief Executive Falguni Nayar said.
The company plans to expand its beauty network to about 600 stores over the next few years, from 338 in September.
Separately, Nykaa said its board approved the acquisition of an 82% stake in premium makeup brand Simply Nam for up to 330 million rupees.
Reuters
