Nykaa Fashion aims to achieve EBITDA profitability in FY26, Retail News, ET Retail

NEW DELHI: Vertical e-commerce major Nikaa's fashion division aims to nearly triple its growth over the next three years and achieve Ebitda profitability in FY26, the company said in a statement on Friday.

“Nykaa Fashion has demonstrated impressive growth, crossing $400 million in GMV in FY24. Over the past year, the company has expanded its EBITDA margins by over 600 bps. Building on this success, Nykaa Fashion aims to grow 2.5-3x over the next three years and achieve EBITDA positive status in the near future,” a company statement said.

Nika Fashion commands a 20% share of the women's online premium market, according to the company's annual report. The company said it saw a 44% increase in order volume to 7 million in FY24 compared to FY21.

Nykaa said it is targeting a CAGR of mid-to-high 20% through FY28 for its beauty retail business.

“The results of our recent investments in fashion and eB2B have been reflected in significant improvement in profitability across both businesses over the past year. We expect margins from both businesses to continue to expand rapidly over the next two to three years, leading to improved consolidated margins for Nykaa,” said Falguni Nayar, Chairman of the Board, Founder and CEO, Nykaa.

Nykaa, which has a 30% online market share, aims to double the number of stores by FY27. Currently, the company operates 187 stores across 68 cities.

Nika enjoys a contribution margin of 25.5% in its beauty business and aims to sustain this margin in FY24 by reinvesting improvement potential for growth, the company said.

Nykaa derives 84% ​​of its net sales from its beauty business, followed by fashion, which it expects to grow its share to 21% over the next five years.

The company has been focused on reducing operating expenses, with fulfillment expenses falling to 9.5% of total revenue in fiscal 2024, down from 10.9% in fiscal 2023 and 12.7% in fiscal 2022, according to the annual report.

Nykaa operates 44 warehouses across 16 cities. The company said it has reduced order-to-delivery time in its beauty business, significantly improved leakages and reduced reverse logistics costs. Additionally, the e-commerce giant said it is working with brands to drive efficiencies in fulfillment.

The company's overall marketing expenses remained flat at 11.5% of revenue in the last fiscal year, although there were some reductions in both the beauty and fashion divisions.

Nika's labour costs fell to 8.8% in FY24 from 9.6% in the previous fiscal year, according to the annual report. For its fashion business, the company said investment in employees and fixed costs will increase by a minimum of 1.4-1.5 times.

The beauty apparel retailer said in a BSE filing on Friday that it has allotted 473,000 equity shares under its employee stock option scheme. A month ago, Nykaa had granted stock options of 405,000 shares.