- GMV (Gross Merchandise Value): INR 3,217 crores for Q4, 32% YoY growth; INR 12,446 crores for FY '24, 28% YoY growth.
- Revenue from Operations: INR 1,668 crores for Q4, 28% YoY growth; INR 6,385 crores for FY '24, 24% YoY growth.
- Gross Profit: INR 710 crores for Q4, margins at 42.6%; INR 2,739.2 crores for FY '24, margins at 42.9%.
- EBITDA: INR 93.3 crores for Q4, 32% YoY growth, margins at 5.6%; INR 346.2 crores for FY '24, 35% YoY growth.
- Adjusted EBITDA: INR 112.2 crores for Q4, 56% YoY growth, margins at 6.7%; INR 380 crores for FY '24, 43% YoY growth, margins at 6%.
- Profit Before Tax (PBT): INR 19.6 crores for Q4, 126% YoY growth, margins at 1.2%; INR 69 crores for FY '24, 80% YoY growth, margins at 1.1%.
- Profit After Tax (PAT): INR 9.1 crores for Q4, 298% YoY growth; INR 39.7 crores for FY '24, 90% YoY growth.
- BPC (Beauty and Personal Care) GMV: INR 2,119 crores for Q4, 30% YoY growth; INR 8,340 crores for FY '24, 25% YoY growth.
- Fashion GMV: INR 842 crores for Q4, 27% YoY growth; INR 3,270 crores for FY '24, 27% YoY growth.
- Superstore GMV: INR 835.3 crores for FY '24, 84% YoY growth.
- Annual Unique Transacting Customers (AUTC): 11.7 million for BPC, 18% YoY growth; 3 million for Fashion, 20% YoY growth.
- Number of Orders: 11.1 million for Q4, 27% YoY growth; 41.7 million for FY '24, 20% YoY growth.
- Physical Retail Stores: 187 stores across 68 cities, 50% GMV growth over the past 3 years.
- CapEx: Significant reduction in FY '24 compared to FY '23, with continued investment in retail expansion and tech capabilities.
Release Date: May 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- FSN E-Commerce Ventures Ltd (BOM:543384, Financial) reported a 32% year-on-year growth in GMV for Q4 FY '24, reaching INR 3,217 crores.
- Revenue from operations grew by 28% year-on-year, amounting to INR 1,668 crores for the quarter.
- The company achieved a 32% year-on-year growth in EBITDA, with margins at 5.6%. Adjusted EBITDA showed a 56% year-on-year growth, with margins at 6.7%.
- The Beauty and Personal Care (BPC) segment saw a 30% year-on-year growth in Q4, driven by new customer acquisition and strong performance in core categories like skincare and haircare.
- The Fashion vertical reported a 27% year-on-year growth for both the quarter and the full year, with improvements in returns, RTOs, and cancellations contributing to a better P&L.
Negative Points
- Despite the growth, the gross margin for the BPC segment has seen a decline year-on-year, influenced by increased investment in new customer acquisition and brand-funded discounts.
- The company's overall EBITDA margin improvement has been modest, with only a 100 basis points increase over the past two years, raising concerns about the pace of profitability enhancement.
- The Fashion segment, while growing, has faced challenges in optimizing marketing costs and achieving the right customer segments, impacting its overall growth trajectory.
- The Superstore business, although showing significant growth, operates at lower gross margins, affecting the consolidated margin profile.
- The company has incurred costs related to ESOPs, GCC business investments, and corporate restructuring, which have impacted the overall profitability and are expected to continue in the near term.
Q & A Highlights
Q: My first question is on the margins. We talked about adjusted EBITDA margins. If you could just help us understand whether these items that we are talking about, the ESOP expenses and GCC business or other corporate restructuring expenses, are these nonrecurring in nature? And should we expect they will not be there next year? And also, how much is the revenue contribution from GCC right now?
A: GCC was literally launched in this quarter that we're talking about, fourth quarter, with the website going live just in early January and the store going -- the official launch happening in March. So I think the true results and revenue of GCC will start flowing in through this year. The ESOP expenses are likely to continue at a similar level going forward, but corporate restructuring is a onetime cost.
Q: What we have seen for the year is we've grown at about 25% and we are seeing an 80 bps improvement in adjusted margin. So is that the kind of trajectory you're looking at in profitability every year? Or do you think it can be much faster as we move ahead?
A: We don't like to predict the future, but we have seen our growth momentum accelerate in the fourth quarter of this year. The main EBITDA margin improvement will come as our new businesses, fashion and Superstore, increase their contribution margins. Marketing costs, in particular, can gradually come down over the next couple of years.
Q: Growth in Fashion from existing customers was much stronger, I believe, than the new customers. And I think Beauty also showed very strong growth from existing customers. So what is driving this? And do you think that growth profile for the business can be similar in the next few years, where existing customers have a lot more growth to offer?
A: We invested behind new customer acquisition this quarter. There are many customers out there who are yet not shopping beauty online, and Nykaa is their first destination. Existing customers are very loyal and sticky. We do a lot of CRM initiatives to ensure that our existing customers continue to interact and engage with the platform.
Q: My first question is on gross margins. And I see obviously, growth has accelerated in the fourth quarter, which is an excellent sort of basic acceleration, I would say, congratulations for that. But I also see that there's a gross margin journey for both at the company level as well as, I think, at the BPC level. It has, I would say, come down Y-o-Y. So my question is that is it a deliberate strategy? Or there is something which is as a part of the mix or more discounting or something else is going on that is either one-off or sustainable in nature?
A: Nykaa has taken a call to pursue new customer acquisition aggressively. The amount of investment is being made in new customer acquisition, which is funded from the gross margin line. The BPC segment is a combination of e-commerce, physical retail, and our Beauty private label brands. The gross profit margin has improved sequentially for the Beauty business in the fourth quarter compared to the third quarter.
Q: Shouldn't we more double down on customer acquisition investment? For example, if I were to construct a bit of simpler sort of analogy here, that you're a business who is recruiting customers on behalf of every other brand that sells on the platform. And you do that by way of customer acquisition and marketing spend. In some sense, then brands should partner with you in recruiting those customers because they benefit from that. So in some sense, the advertising income, is that a source of that spend, indirectly or directly?
A: We are definitely doing exactly what you are suggesting, and it's being accelerated. We are capturing bigger and bigger marketing income but delivering high revenues against that. Our effort is to keep capturing bigger marketing income while delivering high revenues.
Q: Just looking at BPC and Fashion business and in terms of the number of orders you get per annual transacting users. In general, fair to assume, right, that Fashion should see more engagement over time, more orders per actual transacting customer per year? For you guys, right now, it's about maybe 2, 2.5 for Fashion; for Beauty it's about 3 to 4. Now I'm wondering, because in Fashion, you focus a lot on right mixing, your customer site, et cetera. Shouldn't we expect that order volume per transacting customer to go up?
A: We in general see the transactions per customer will go up. That is definitely part of the whole repeat exercises that we're doing. We are pushing the average transaction per customer per year to go up. By adding more categories and being able to service more of their needs, we believe there is expansion on transactions per customer that can be expected.
Q: If I just look at the store addition that you've done this year, right, you've mentioned some details around where you have opened them. Just looking at FY '25 and onwards, if you can give a color on where your store additions are going to be. And with your own brands, do you have plans to go onto some of those quick commerce platforms?
A: We believe there's an opportunity for about 350 to 400 stores in the country. We're not even halfway there yet. You will see a similar pace, if not a slightly accelerated pace of store addition over the next several years. In terms of quick commerce, for a very limited assortment of very basic SKUs, quick commerce could be a channel for certain brands of ours. One of our brands, Dot & Key, is already retailing a limited assortment through quick commerce.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
