The re-entry of Singapore-based Shein is expected to increase competition in India’s fashion market. For now though, FSN E-Commerce Ventures Ltd, the parent company of Nykaa, is unperturbed. In its December quarter (Q3FY25) earnings call, Nykaa’s management dismissed concerns over Shein’s launch, citing the country’s large and diverse fashion market while noting that Shein is dominant only in Western wear.
Nykaa has reaffirmed its goal of achieving Ebitda break-even in the fashion business by FY26. In Q3FY25, fashion’s contribution margin as a percentage of net sales value (NSV) rose 184 basis points year-on-year to 8.8% despite a steep jump in marketing expenses.
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Still, fashion remains a soft spot for Nykaa. Despite the festive season, gross merchandise value (GMV) growth slowed to 8% in Q3, while average order value (AOV) was up almost 5% to ₹4,901. Order volumes and purchase frequency remained largely flat. Nykaa has significantly widened its fashion portfolio to more than 4,000 brands from 1,400 in Q3FY22, but cross-selling synergies with the beauty business haven’t meaningfully accelerated growth.
Nykaa’s consolidated GMV was up 25%, with the beauty business clocking 32% GMV growth, aided by a 26% rise in unique transacting customers. However, beauty AOV was flattish at ₹2,127. The Pink Friday sale and Nykaaland festival helped drive demand, while eB2B’s share of GMV in beauty & personal care (BPC) inched up to 8% from 7% last year.
Discounts pinch
That said, aggressive discounting by brands kept NSV growth at 25.8%, trailing GMV expansion. Despite a boost from ad revenue, BPC’s contribution margin as a percentage of NSV improved by only 30 bps year-on-year to 21.2%. Nykaa’s consolidated Ebitda margin rose 80 bps to 6.3%. Meanwhile, its own beauty brands saw strong 49% growth. The offline store network expanded to 221 locations, accounting for 9% of beauty GMV.
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Management said it remains focused on driving customer acquisition and premiumisation while closely monitoring discounting trends. A potential rebound in consumption from Q1FY26 could serve as a tailwind for growth.
Nykaa’s shares are now 25% below their 52-week high of ₹229.80, set on 23 August. While premium positioning in BPC offers some cushion against quick commerce, rising discounts could weigh on margins.
“Nykaa’s focus on multiple initiatives across channels/brands and regions will continue to drive strong revenue growth in BPC. However, margin expansion is likely to be slower, given upfront investments and high competition in fashion,” said a Nomura Global Markets Research report dated 11 February.
A turnaround of the fashion business thus remains the biggest uncertainty. Until it plays out, Nykaa’s growth story will remain a balancing act.
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