Beauty and personal care segments shrug off Omicron wave in Dec quarter

Companies post strong growth in Q3; competition heats up as ABFRL, TCNS Clothing enter space

The beauty and personal care segments witnessed strong traction in the December quarter (Q3) of financial year 2021-22 (FY22) despite the Omicron wave, even as companies like Aditya Birla Fashion and Retail (ABFRL) announced their entry into the segments.

Falguni Nayar, executive chairperson, managing director and chief executive officer of Nykaa, the online beauty brand that is also increasing its offline presence, told investors in a post-earnings conference call that sequentially Q3 was one of the best from a beauty perspective.

Nykaa’s beauty and personal care gross merchandise value (GMV) grew 29 per cent quarter-on-quarter (QoQ) and 32 per cent year-on-year (YoY) to Rs 1,533 crore. Also, on an average monthly unique visitor basis, beauty and personal care grew 4 per cent QoQ and 39 per cent YoY with 22 million unique visitors. During the quarter, Nykaa also had its annual sales event, which ran from November 24-30.

Shoppers Stop, too, saw its beauty sales grow 41 per cent YoY during Q3 and it accounted for 17 per cent of its overall sales. The retail chain is also looking at aggressively expanding both online and offline. It has launched standalone beauty stores called SS Beauty.

For the retail chain, make-up accounts for 51 per cent of its total beauty sales mix and, hence, “The company expects this to be a big contributor going forward to our sales,” Venugopal Nair, MD and CEO of Shoppers Stop, told investors during a conference call.

While demand and sales are growing fast, so is competition.

“Customer acquisition / performance marketing costs will only increase due to intense competition as everyone is eyeing the same consumer. Purplle.com could also get aggressive due to its recent funding,” Ankit Kedia, vice-president of Phillip Capital, told Business Standard.

According to data by Tracxn, Purplle raised $34.7 million in January led by Sequoia Capital. Blume Ventures also participated in this round. In November, Purplle raised $65 million from Premji Invest, the family office of Wipro founder Azim Premji and nine other investors including Blume Ventures and Sequoia Capital. In October, it raised another $75 million from Kedaara Capital and others.

Nykaa’s Ebitda margins stood at 6.3 per cent during Q3, compared with 13.2 per cent a year ago.

In its investor presentation, Nykaa said its marketing and advertisement expense was 14 per cent of its revenue from operations in Q3 compared to 7.5 per cent a year ago, due to continued focus on building brand awareness and higher acquisition of new customers. 

Trent, which houses retail chain Westside, also said in a release after announcing its Q3 numbers that its emerging category of beauty and personal care saw traction in the quarter.

With companies seeing good growth in the space, it is not surprising that new players such as ABFRL and TCNS Clothing have entered the segment.

ABFRL announced in the quarter that it signed an agreement to acquire 51 per cent stake in House of Masaba and will leverage this partnership in the beauty and personal care space. TCNS Clothing is also conducting a pilot under its brand ‘W’ in the cosmetics space.

In a conference call with analysts, Anant Daga, MD of TCNS Clothing, said the company has just launched cosmetics in 50 stores and has received a good response from both its selected online partners and its stores.

“In the cosmetics category pilot is under way, and we will have more to share in the coming season. We are excited to see how these initiatives are building up and are fully committed to a fast scale up over the next few quarters. We will have much more to share by the end of spring-summer 2022 season,” Daga told investors.