Nykaa reports 49% drop in quarterly net profit as expenses surge

The cosmetics-to-fashion platform, headed by Falguni Nayar, has said its marketing expenses in 2020 came in exceptionally low as it did not spend as much on advertising due to the pandemic

Indian beauty products retailer Nykaa reported a 49% fall in quarterly net profit on Friday, hit by soaring fuel and logistics costs at a time when the company is ramping up its marketing spend to draw in more customers.

FSN E-Commerce Ventures Ltd, Nykaa's parent, which has posted steep declines in profits in all three quarters since going public, has spent more on beefing up its shipments and warehouse capacity to sidestep supply issues.

Headed by Falguni Nayar, the cosmetics-to-fashion platform has been aggressively picking up inventory from global brands to meet the swelling domestic demand for makeup, fragrances and skincare products in the run up to the pre-wedding season.

While that helped Nykaa's revenue from operations jump 31% to 9.73 billion Indian rupees ($125.45 million), rising inflation has put a damper on spending power of lower-income consumers in India.

"Inflationary pressures are building up more so in the first quarter this year," Chief Executive Falguni Nayar told Reuters, but noted that higher food and fuel prices have not dissuaded the company's high-end shoppers.

Nykaa, which has a 28.6% market share in the domestic online beauty and personal care products space, had quarterly gross merchandise value (GMV), or the monetary value of orders across the company's platforms, of 17.97 billion rupees, up 45% from last year.

Its total orders climbed to 8.6 million from 6.2 million, aided by strong growth in its fashion segment.

For the fourth-quarter ending March 31, Nykaa's total costs jumped 35% to 9.79 billion rupees, including a 48% swell in fulfillment costs, while its marketing and advertisement expense surged 66%.

Consolidated net profit fell to 85.6 million rupees from 168.8 million a year earlier.

($1 = 77.5620 Indian rupees)

(Reporting by Deborah Sophia in Bengaluru; Additional reporting by Rama Venkat; Editing by Shailesh Kuber)