Nykaa misses Q1 profit estimate as apparel sales slow sharply

Indian retailer Nykaa reported a much smaller-than-expected quarterly profit on Tuesday, hurt by slowing growth in its mainstay beauty products and especially in apparel sales.

The company, listed as FSN E-Commerce Ventures said its consolidated net profit nearly tripled to 96.4 million rupees ($1.2 million) in the first quarter.

However, that was much smaller than analysts’ average estimate of 226.8 million rupees, as per LSEG data.

Nykaa, like other companies selling discretionary products, was hit as people chose to spend on products more essential for the intense summer and as the general elections, which spanned half the April-June quarter, and heatwaves led to fewer store visits.

However, strong online sales of beauty and personal care (BPC) products helped Nykaa overcome the hit to its retail stores.

Overall revenue in the BPC segment increased 23% in the quarter, slightly slower than the 24% rise in the previous quarter. The business, which houses Nykaa’s own brands as well as the likes of Estee Lauder, Dior, and Givenchy accounted for 91% of the company’s total revenue.

However, besides the drop in store visits, Nykaa’s fashion business was also hit, opens new tab by fewer wedding dates this quarter, something that has also weighed on the likes of jeweller Titan and shoe seller Metro Brands. Nykaa also faces stiff competition from a host of other retailers.

Revenue in Nykaa’s fashion business, which sells clothing, footwear and handbags and houses brands including Cider, Steve Madden and Superdown, increased 21%, down from 27% in the previous quarter.

The fashion business’ gross merchandise value (GMV), or the monetary value of all orders, growth slowed to 15% from 27%, much sharper than the drop in the BPC unit, where growth slowed to 28% from 30%.

The BPC unit’s GMV also beat HDFC Securities’ estimates of a 21% rise, but the fashion unit missed an 18% growth estimate.

As a result, while Nykaa’s total revenue rose 23% to 17.46 billion rupees, it missed analysts’ average estimate of 17.58 billion rupees.