NYKAA - FSN E-Commerce Ventures Limited Share Price

Management provided an optimistic outlook for FSN E-Commerce Ventures Limited (Nykaa) for the coming year, albeit with caution due to external economic factors. For FY26, the company's net revenue hit INR 10,000 crores, marking a 26% year-on-year increase, with sustained growth momentum expected to continue, although inflation and global concerns may pose challenges. Management emphasized the industry's resilience during tougher economic conditions, noting that their offerings are often seen as "small luxuries," which tend to maintain demand.

Key forward-looking points include:

1. Growth Aspects: The Gross Merchandise Value (GMV) for FY26 was INR 15,000 crores, with projections for continued 25-30% growth in the coming quarters, depending on the macroeconomic landscape.

2. Profitability Improvement: The EBITDA margin improved substantially to 7.5% for FY26, up from 5.0% in FY23, with plans to maintain or exceed these margins through operational efficiencies and strategic investments.

3. Customer Acquisition: A focus on new customer acquisition has doubled the annual unique transacting customer base to 45 million. Management anticipates this growth to persist, driven by AI-driven marketing efficiencies that enable a personalized customer experience.

4. Expansion Plans: Plans to increase the number of retail stores by 50-70 annually, with a goal of reaching 500 stores over the next few years. The launch of "Nykaa Now" also aims to boost direct-to-consumer sales via rapid delivery.

5. Brand Portfolio Growth: The House of Nykaa saw a 50% GMV increase, with ongoing efforts to incubate new brands and expand existing ones. Acquisitions and strategic partnerships (e.g., with Nike) are also expected to enhance brand presence and profitability.

Overall, while management is optimistic about sustained growth and improvements in profitability, they remain vigilant regarding the potential impact of inflation and global economic conditions on future performance.

Question 1: What is your outlook for the next year in terms of growth and margins, especially considering inflationary pressures?

Answer: It's challenging to forecast precisely. April and May have shown good momentum, but global factors like currency depreciation and oil prices make us cautious. Our core consumption categories tend to be resilient, generally regarded as small luxuries, which are less affected in tough times. While we see AI benefits enhancing our growth, cautious external conditions cannot be ignored. We aim to sustain growth around the levels observed recently, barring unforeseen global disruptions.

Question 2: Can you elaborate on how you've improved new visitor acquisition while controlling marketing expenses?

Answer: We're experiencing improved marketing efficiency across the funnel, from visits to conversions. Our focus on enhancing the digital experience for new customers significantly boosts engagement and repeat transactions. We've effectively utilized AI to optimize our customer acquisition strategies on platforms like Meta and Google, enabling better personalization and driving costs lower while increasing traffic. Overall, it's a concerted effort to create a seamless customer journey.

Question 3: What should we expect for the steady state margins in BPC and Fashion, especially with increasing inflation?

Answer: Beauty has three diverse segments, each having its margin profile. Overall, we expect continued margin improvements driven by efficiency in each segment, although B2B may not grow as fast. Predictably, pricing pressures may arise, but we focus on long-term growth strategies to manage these risks. Fashion has also shown positive margin trajectories, thanks to improved customer retention and brand partnerships, indicating an upward trend.

Question 4: How do you see Dot & Key's growth sustaining, and will it impact overall brand margins?

Answer: Dot & Key has become a significant player and can continue to grow. We aim for a balanced approach, with each brand contributing to different growth assets. We have other brands in development that show promise, which can offset Dot & Key's growth. While it's logical to question long-term growth rates, we are focused on scaling all our brands effectively and integrating innovative strategies to sustain robust growth.

Question 5: What's the contribution of Nykaa Now to overall GMV, and what are your offline expansion plans for FY '27?

Answer: While I can't disclose exact figures, Nykaa Now has meaningfully impacted our delivery performance in metro areas, which we've been building out this year. Our offline expansion targets are similar to last year, anticipating around 50-70 new stores as we enhance density in Tier 2 and 3 towns. We are currently covering all top 99 cities, aiming for further penetration and increasing our retail footprint to about 500 stores over the next few years.