Good evening, everyone. This is Michelle from Chorus Call. Welcome to FSN E-commerce Ventures Limited Q1 FY 2025 Earnings Call. From the management at Nykaa, we have Miss Falguni Nayar, Executive Chairperson, MD, and CEO, Mr. Anchit Nayar, Executive Director and CEO, Beauty E-commerce, Mr. Nihir Parikh, CEO, Nykaa Fashion.com, Mr. Vishal Gupta, CEO, Nykaa Distribution, Mr. P. Ganesh, Chief Financial Officer. Before we start, we would like to point out that some of the statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. Kindly note that this call is meant for investors and analysts only. By participating in this event, you consent to such recording, distribution, and publication.
All participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation from management concludes. With that, over to you, Miss Falguni Nayar, for opening remarks. Thank you.
Thank you very much, Michelle, and, I'm delighted to be here amongst all of the investors, who are joining us on the call today. And, happy to be presenting the investor results for the... I mean, results for the quarter ended, June 2024. I'll start with the performance highlight for the consolidated business. Really happy to say that, the GMV has come out at INR 3,321 crores, which is a 25% year-over-year growth, followed by revenue from operations growing at a similar percentage of 23% year-over-year and, represented at INR 1,746 crores.
Gross profit has come out at INR 756 crore, similar year-on-year growth, and EBITDA stands at INR 996 crore, which represents about 5.5% EBITDA margins. It's an improvement over previous year, with 31% growth in EBITDA. We have been pointing out the adjusted EBITDA in more recent quarters only because on a year-on-year comparison, we did not have the GCC business a year ago, and also there were some organizational restructuring expenses. So corrected for that, the adjusted EBITDA stands at INR 109 crore, which is a 44% year-on-year growth, and EBITDA margin would be at 6.2%, which would be a 90 basis point improvement over the previous year.
On the PBT, thanks to the restructuring and various measures taken, the PBT is at about INR 22 crore, which is a 127% year-on-year growth and margin, PBT margin of 1.3%, and the PAT is at INR 13.6 crore, which is a 150% year-on-year improvement. Next. Diving deeper, the beauty business for the quarter grew at 28% year-on-year, and this is on the GMV basis. And even on the net revenue basis, the growth has come out at 23% year-on-year. Throughout the year, most of you have been observing that the industry has seen higher discounts from various brands that are traded on our platform, and hence there's been a little bit of a gap between the GMV and the net revenue growth.
However, this trend started about a year ago, and we are now at the end of the cycle, where hopefully from here, the GMV and the net revenue growth will be similar. On the fashion side, similarly, the GMV growth was at 15% year-on-year. However, the net revenue growth was stronger at 21% year-on-year, with the net revenue at INR 148 crore, and that represents improvement in some of the shrinkages and other factors that will be shared with you as we go dive deeper into the presentation. Next. So I think the key highlight for the quarter is that Nykaa continues to build its customer base. Now, our cumulative customer base stands at 35 million, which is a 33% year-on-year growth. And brand partners on all our platforms, if you were to see, are about...
We deal now with 6,700+ brands, both global and domestic brands, and we've added more than 1,500 brands in last one year alone. The beauty store network now stands at 200-strong, and this is an important milestone at 200 stores in our network, and this is one of the largest network of beauty stores in the country. On the fulfillment side, we now have 44 warehouses servicing 98% of pin codes, and we are investing in faster delivery in top cities, as you'll see in later part of our presentation. On the content, we continue to drive harder with 1 billion reach for our content, created through multiple IPs, which we've been adding to our library.
On the category creation through Nykaa Play and stepification have also taken center stage this year, with a lot of work being done in that area. We are happy that now our consolidated GMV is a solid $400 million in this first quarter alone. And, you know, obviously, you're aware that it comes through four platforms that we have, which is Nykaa.com, Nykaa Fashion, Nykaa Man, Superstore on the digital side, and then, of course, physical stores on the beauty side. Next. I'll now pass on to beauty multi-brand retail, and I would request Anchit to take us through that.
... Yeah, thank you so much. So moving on to the first slide, I think, we covered the revenue growth as well as the total revenue for the business in previous slides. So I'll talk-- I'll spend a few minutes on some of the key achievements for the beauty multi-brand retail business this quarter. First and foremost was the significant growth in new customer acquisition. We delivered a 27% growth year-over-year. In terms of annual unique transacting customers, this grew at 21%, taking us to 13.1 million unique transacting customers for the year. And the number of orders that were placed on the platform for the quarter was about 12.4 million orders, which is a 26% growth year-over-year.
So the first part of the business I'll spend a minute on has been the continued focus on improving and growing the assortment of brands which we have on the platform. And as you can see, in a period of just three months, AMJ, we managed to add a significant number of brands, both global and domestic, to the beauty platform. And these brands are across categories, whether it be color, cosmetics, skincare, or haircare. And this goes to show you that Nykaa continues to be the retailer of choice for both domestic and international brands. So despite our scale and already having a significant number of brands on the platform, we continue to identify new opportunities, both in India and abroad, to continue to strengthen the assortment of the platform. Next slide, please.
One of the key initiatives that I've spoken about in the past has been the focus of Nykaa to increase the number of categories within the beauty and personal care space that we are addressing and that we are taking meaningful market share in. So as you may know, makeup and skincare were two of the core categories to our beauty play historically, and they have served us well in terms of growth, and they continue to do so. However, we believe that fragrance is the third pillar in any beauty specialty beauty play globally, and this has been a big focus for of ours over the past 12 months, and you can see that it's paying rich dividends. Our prestige fragrance category has grown at over 74% year-over-year.
Sorry, 74%, I think this is year-over-year. However, it's written Q3 FY 2024, but, it's, I think it's Q4 FY 2024. In terms of the types of brands which we are retailing on the platform, it's the luxury, the luxury, fragrance brands, including Burberry, Dior, Estée Lauder, Jo Malone, Tom Ford, etc., and many more in the pipeline. With regards to our market share in the fragrance category in the country, we believe that our market share on the prestige side is roughly 13%, and this has been a 300 basis point improvement over FY 2023, and that will continue to improve, in FY 2025 as we enter—as we have just begun the first quarter of the year. We believe this will continue to increase.
So we're managing to sell more categories to our existing customers, which increases the basket size as well as the annual consumption value of our existing customers. Next slide, please. So I spoke a little bit about how we are working on increasing our category width and selling more categories within beauty. Another big focus of ours has been selling going deeper within existing categories and selling a wider basket from within existing core categories. And I have highlighted in the past Nykaa's initiatives around skincare, which was our CSMS program, where we created India's first skincare routine called iBeauty, and it was a four-step routine: Cleanse, Serum, Moisturize, and Sunscreen.
We did a lot of commercial activations around it, a lot of education and awareness across content channels as well, and we've seen that it has paid rich dividends. So in skincare, we have CSMS. In makeup, we have something called Prep, Cover, Set. And in haircare, we have healthy hair habits, which consists of Treat, Wash, and Nourish. So by driving a focus on stepification of beauty, we're managing to increase customer awareness for the depth of each of these core categories and, resulting in significant growth for these subcategories that are now being, that are now at the forefront of our educational and commercial initiatives. So you can see some results, early results. Sunscreen, which is a subcategory that is part of our CSMS routine, has grown at 1.3x the category growth of skincare.
Setting spray, which is part of our makeup routine that we've been pushing, has also grown 70% faster than the rest of the color cosmetics category. And hair serum, which is an important part of the treat, wash, nourish routine, has grown at 2.6x the category growth. So we are seeing that our ability to actually drive meaningful revenue growth in subcategories, which we take up as a major focus area for the business, has now been proven out. Next slide, please. So as I said last year, last quarter, we spoke about CSMS. So this quarter, we're just giving you some color on the Healthy Hair Habits campaign, which we kicked off in a very big way across on platform as well as off platform.
The objective of Healthy Hair Habits was to drive the stepification by empowering consumers with a haircare routine and to really drive education about highly efficacious solutions that can help solve specific hair concerns. So you can see some of the work that we did on platform and off platform, content-heavy, education-led, delivering almost 290 million impressions, which is quite significant. And as I alluded to earlier, this has resulted in commercial impact as well. Both hair serums and hair masks are growing at 60% and 22% respectively, which is faster than the category, hair category growth. We're also seeing customer growth in our hair category of about 24% versus BAU. Next slide, please.
So now coming to our content play, because we've always spoken about the importance of content to commerce, we have a feature that we have relaunched that is called Nykaa Play, and this is an incredibly immersive, gamified, shoppable content feed that exists on our app. Consumers can watch live streams, they can play games, they can interact with influencers, and of course, they can shop. This is what we call as live commerce, and this is content-led commerce, and this has been a very strong initiative from our side this past quarter. Two big impacts it has: one is, of course, it leads to improved product discovery and consideration, especially for more sophisticated products.
Secondly, it's a big driver for building engagement and to increase the number of visits per visitor as well as the time spent on the app. And you can see, that, Nykaa Play's relaunch has led to a 35% higher cart addition by those who are actually actively using the Nykaa Play feature on the app versus those who are not, and also 30% higher visits per visitor, of those who are actively using and engaging with Nykaa Play. So we're really leveraging Nykaa Play to drive customer engagement, improving the purchase frequency, and also improving the retention on the platform. Now, coming to our physical retail business, as you can see, and as was mentioned earlier in the call, we have now achieved an important milestone in our store expansion plan. We currently have 200 stores across the country.
Today, we have 200 stores across 72 cities, and we cover a total retail, retail area of about 1.9 lakh sq ft, which is double, which is double what it was just two years ago. So it took us. If you look at the bar chart on the top right, you can see that it took us about eight years to build our first 100 stores. And, we've managed to build the next 100 stores in just about two years. So, massive acceleration in our physical store rollout. That business is definitely proving to be incredibly valuable, not just in terms of the revenue that it's driving, but also in terms of the network effects that it's having on our e-commerce business and the positive flywheel that it is creating.
This business has grown, in terms of footprint, it's doubled in a matter of two years, but even in terms of revenue growth, this business has grown at about 70% over the last three years, and today contributes to roughly 8% of our omni-channel beauty GMV. As I've said in the past, the reality is that in physical retail, we can have maximum 80-100 brands, whereas online we've got 3,500+ brands, so it's not really apples to apples. But for the brands who are present across both online and offline, the physical retail channel is a very large and meaningful part of their total business on Nykaa. So these are just an example, a few examples of some of the stores we've opened this past quarter.
One store was opened in Dehradun, the other one in Jaipur, and these are images of those stores for Nykaa Luxe. Then Nykaa On Trend, we opened a store in Amritsar as well as Rohtak. Again, these are just a few of the examples. We see, our physical retail stores playing a very important role in what we call as services and customer engagement. So our stores serve as a hub for a lot of brands to actually engage and interact with our consumers through experiences and events. As you can see in Q1 of FY 2025, we hosted 10 prestige brand events in our stores, as well as 60 master classes that were held across our stores, as well as in the atriums of the malls where we are present.
So we managed to host over 70 events across 50 cities in the last three months, and we had over 7,000 customers who registered to attend these events in person, across the last three months. So moving on from physical retail and coming to, the technology, part of our e-commerce business, we have invested heavily in what we call as personalization. It's been something, again, that we've spoken about in the past, and you can see that it is now active on the platform, and it is bearing fruit. Just a couple of examples of how we're using personalization to deliver a very specific and relevant experience to our consumers.
On the left side, you'll see we have now something called Cohort-Based Discovery Live, whereby customers who show a propensity to buy luxury products get shown a higher share of luxury brands on their home feed and vice versa. Those who have less propensity luxury see more mass and prestige brands and curations. What we're seeing is that from even this very, very basic, high-level personalization work that we've done, we've already observed higher click-through rates, impressions, and an increase in our share of business coming from luxury brands. Second, we've also launched a hyper personalization- hyper-personalized collection widget that's called Explore Your Favorite Brands, and this is hyper-personalized using the user's brand as well as category affinity. Affinity is derived from the user's past interactions with the site.
So the kind of products that they viewed in the past, the cart additions that they've done, the searches they've made on our platform, all gets fed into an algorithm that helps us to really surface the relevant SKUs to the relevant consumers. This, of course, will be, and it already is proven to be, a big driver for both product discovery as well as conversion. Finally, I spoke about stepification of beauty in the previous slides, how we're using content to really improve the education and the awareness for stepification of beauty that will help us drive deeper penetration within existing categories. We've also paired this with technology, tech improvements that have allowed us to drive our stepification objective on the site as well through recommendation widgets. So again, this is the kind of products you're adding to cart.
We're able to recommend similar adjacent products that would help you complete that particular routine which we're trying to build. So this, of course, should drive higher ABS, average basket size, as well as higher average order values over time. So those are just a couple of the examples of some of the early personalization campaigns which we've run on the platform, and I think you'll see many more to come. Next, please. Yeah, now spending a minute on our supply chain and warehouse capabilities. We've increased the number of our warehouses by almost 2.4x in the last three years, so from 18 warehouses in FY 2021 to 44 warehouses in Q1 of this year.
Capacity has also increased by a similar amount 2.5x, and today we have over 1.5 million sq ft of warehouse capacity. And this regionalization strategy of getting our warehouses closer to the consumer has allowed us to significantly improve our order-to-delivery timelines. So in FY 2021, on average, our order-to-delivery timelines were close to four days. Today, we have reduced that drastically, whereby the average order-to-delivery timeline on our platform across all 19,000 PIN codes, across the length and breadth of India, is now 2.2 days. So a 45% reduction in our O2Ds in the past three years, in large part driven by this investment in warehouse regionalization that we've done over the past few years.
Yeah, so in continuation with our objective, our key objective to deliver better consumer experience through reducing our order-to-delivery timelines and getting the product into the consumer's hands faster, I wanted to just share with you that as of today, as of the end of Q1 FY 2025, 50% of all orders that are placed on the Nykaa app from the 12 major metro cities are being delivered either same day or next day. For us, 50% of our total orders comes from these top 12 metros, and therefore, 25% of total orders placed on Nykaa are being delivered already same day or next day.
Now, given a lot of the investment we've made behind improving this even more than where it is improved to today, we are happy to also share with you that we expect by September of this year, that close to 70%-80% of all orders from the top 12 metros and cities in India will be fulfilled same day or next day. And about 50% of the orders from the next 112 cities in the country will be fulfilled same day or next day. So 65% of our order volume comes from these top 120 cities, and the weighted average will take us to about 50% of all orders placed anywhere in India will be delivered same day or next day by September of 2024.
Next slide, please. And with that, I'll hand it over to Nihir to take you through the fashion segment.
Yeah, thanks. So on fashion, basically, the market's been a little subdued in terms of this particular quarter and general retail. The other key thing which happens in this quarter is Indian wear as a category has no festivals, and Indian wear is an anchor category for us. So this quarter tends to have a slightly lower growth than what we end up seeing in all other quarters with respect to Indian wear. So with that backdrop, we had a 15% growth in GMV, as well as a 21% growth in revenue. The higher revenue growth compared to GMV is a function of better quality of business, which basically means we have lesser RTOs and leakages. So the leakages have improved, allowing us to convert to revenue in a better way. Additionally, our service-related incomes and fees have gone up.
The categories which have grown, are something we've been talking about the last few quarters, are anchor categories around women's western wear, which is beating platform growth and has grown at 34% year-on-year. Lingerie and other anchor categories have grown at a 54% for us. And women's athleisure, which is an international trend, is really tracking well for us and has grown at about 100%+. This is supported by amazing new innovation from the many brands we work with and their brand partners, as well as a concerted strategy at our end to build this category with consumers. Next slide. So again, from a positioning perspective, we've spoken about key properties, that we have built. One of the newer ones is the Lux store.
We realized there's an opportunity for us to extend into Indian wear luxe and double down on that. So what we've done is we, over the last six months, we've onboarded 200+ brands in this category alone. And we've accelerated our consumer conversations, accelerated targeting of consumers within this category. So this is early days in terms of where this business is gonna go, and the Luxe Edit, as we call it on our site, is gonna grow, but it's a promising new vertical that's been added to our key conversations that we have with our consumers. Hidden Gems has grown 20%. This, again, where we travel the country, we pick amazing brands in India, handpick them and bring them to our site, and put them under Hidden Gems portfolio.
We've got now a total of 300+ brands, and that's grown about 21% year-on-year. Our First in Fashion, newness, and being First in Fashion is something which has been extremely core to our USP and our ethos. We've seen a 37% GMV growth year-on-year of these new launches that all the brands in the country have done, and its contribution to our total GMV was 24% in this quarter. Again, this is higher than it was last year, last year, again, cementing our belief in creating newness, conversation, and excitement in fashion as a category. And as we grew this business this quarter, the quality of business overall has continued to improve, and these are some simple quality metrics.
If we look at the GMV share from Tier One, we've increased that by a couple of percentage. We look at GMV share from premium shoppers, that has increased significantly from 36%-44% last year to this year. Our leakages, which I spoke a little bit about, which is cancellations, RTOs, have improved by about 10% year-on-year, allowing us to drive better quality business. Our order to visitor conversions has increased from 2.5%-3%. So again, a strong focus on doing good quality business and bringing in amazing customers to our platform has been a concerted effort, and we continue doubling down on that strategy. Now, we spoke a little bit about in the investor annual day about our four Stay Stylish campaigns.
So this is again taking our First in Fashion and style as an anchor. Stay Stylish is our tagline, Nykaa Fashion's tagline, and we created four films along with Janhvi Kapoor and a few other very, very strong and renowned influencers. And this went live last month, and we had in about a month and a half ago, with amazing traction, amazing feedback from our consumers, and amazing reach. Our view-through rates were also very high. We also translated this same conversation from a marketing or a branding perspective all the way through to revenue, which you can see as an effect, which I showed you earlier.
Our first-in fashion percentage of revenue this quarter was higher than we've seen last year, and this is also one of the reasons we've driven this growth for first-in fashion and the branding and the love for Nykaa Fashion and Stay Stylish positioning. Next, please. Yeah. So from a financial perspective, we've had overall a significant improvement in EBITDA margin. We've had overall about a 500 basis points improvement in EBITDA. I'll just walk you through the key drivers of that. One is gross margin. Over the last year, we've every quarter, we've been pushing our gross margin up. Very strong support from our brand partners and the value our platform brings from a marketing income perspective and other service-related income from partners. Additionally, we've also had a few platform fees which we charge consumers at checkout.
So sum of all of these have led to a good, solid gross margin improvement, which has really helped us. Our fulfillment expenses have reduced by about 167 basis points. This is again, a concerted effort, where we've been working on optimizing delivery, from air, certain legs from air to land, faster deliveries, which has also reduced, leakages, which we spoke about earlier. Reduced RTO has also reduced fulfillment expenses, so all, moving again in the right direction. Our marketing expenses improved by about 101 basis points. Again, this is based on the better repeat customer ratio and better quality of business that we are doing.
Reducing some traffic, which we believe we were spending on earlier, which we don't need to, and the conversions have gone up, which has really helped marketing percent, marketing improvement. Leading to an overall contribution margin improvement of 210% or 587 basis points improvement. We also took this opportunity to invest in people and technology, which is being done. As we scale through the rest of the year, this investment is going to play out in a nice way for us. But still with a very healthy 500 basis points improvement overall for the year at the EBITDA level. Handing over to Vishal.
Thanks, Nihir. Hello, everyone. Very happy to share with you that we had another outstanding quarter for the eB2B business, where we continue to scale up our business with top-line growth as well as improvement in the unit economics of the business. As you can see from this chart, year-on-year, we have grown 72% in Q1 this year, and which is actually a 4x growth in just two years, you know, if you compare the same quarter two years ago. And this has come through our increase in scale. You can see the transacting retailers have gone up by 5x in two years and a 65% growth year-on-year. We now have 210,000 transacting retailers, and we serve now 1,000+ cities.
So we are really, you know, scaling up this business very well. Next slide. And you can see that, you know, we are not only growing by scaling up, but we are also very mindful of the quality of the orders. So in terms of absolute orders, we did almost 400,000, 383,000, which is a 45% growth year-on-year. But we also increased the average order value of each order, because that has a significant impact on our unit economics, with more products being sold per order. Also, we are very mindful of the quality of each order. So consistently, we are increasing the share of premium brands and what we call featured brands, which are high-margin brands, so that we drive our gross margin via mix. Yeah, and you can see that from the next slide.
Yeah, next slide. Yeah. So you can see here, right? That our gross margin improved by 274 basis points, which is driven by a couple of things. As we get more scale with more transacting retailers, we actually become more and more important to our brand partners, and we get more ad income... right, so which has gone up quite a bit, and we get a lot of improvement in gross margin via brand mix. Because, you know, those ad incomes and our recommendation engine actually helps the retailers discover new D2C brands which are more profitable for us, and high-margin categories. So very good improvement in gross margin via mix, as well as very high, you know, improvement in fulfillment cost and logistics cost as we move away from 3P to own warehouses.
We are very careful in terms of, you know, opening new warehouses, so that every warehouse is, you know, overall, we are about 80%-80% plus kind of utilization of warehouse space, so, and, you know, constant focus on reducing our packaging costs. So overall, you can see that our contribution margin improved by 520 bps, year-on-year. So net-net, a great quarter for Superstore, with continuous increase in scale and, unit economics improvement. We are well on our, you know, journey of, break even, in terms of long-term plan. Thanks.
Thank you, Vishal. I'll now go and take this on behalf of Adwaita on Nykaa's House of Brands. So just really happy to share that many of our high-growth brands continue to scale well, and we tried to show a two-year trend here so that you can see that it's done very well over the two-year period also. So Dot & Key, which was just about a INR 90 crore GMV run rate brand in first quarter of 2023, has ended first quarter of 2025 at INR 750 crore, and that's 8.3x over two-year journey. Kay Beauty, which was around INR 100 crore about first quarter of 2023, has grown 1.6x to end at about INR 160 crore+ .
Nykd, which was at about INR 65 crore in quarter one of 2023, has grown 2.5x to end at INR 160 crore. Another emerging brand, Kica, also seeing a lot of momentum, and it has grown 6.6x to end the first quarter revenue at INR 20 crore. Just to remind you that Kica was acquired in April 2022. Moving on, trying to explain the composition of our various brands, and this slide doesn't reflect all our brands, but we have a bunch of high-growth brands in our portfolio where we are trying to maintain the momentum and investing in marketing and offline expansion to continue to grow these brands. Then we have mature brands in our portfolio, Nykaa Cosmetics, Twenty Dresses, and RSVP on the fashion side. These have...
They, they were very large brands, and they are very large brands on our platform and outside the platform. And, we are trying to accelerate growth and revamp the innovation funnel of these brands so that we can push for higher growth in these mature brands. And finally, there are many small brands with high potential. On the beauty side, it's the Wanderlust, which is our bath and body range. You've heard many times about it. Nykaa Perfumery is good, is growing very well at the moment, albeit on a medium base. And Nykaa Naturals, where, again, a lot of innovation is being brought in. Similarly, on the fashion side, it's Likha and Gajra Gang, the entire Indian wear category, ethnic wear category, and also MIXT, which is our Gen Z brand.
We are driving awareness and brand building and category and assortment depth to further fuel the growth in these brands. Next. This quarter also saw a lot of innovation. I think for brands to do well, innovation is key, and the quarter saw a lot of innovation with our Nykaa Cosmetics launching Lip Glaze, a new lip formulation, driving 2x the category for the brand. Similarly, Kay Beauty introduced liquid highlighter, which ranked fourth on the highlighters as the top brand. And this liquid highlighter collection was a blockbuster success. Dot & Key introduced their sunscreens, innovative product formats to increase category depth, and among the top three sunscreen brand, Dot & Key enjoys the top three sunscreen brand across all the marketplaces.
On the Wanderlust side, we've introduced new Dreaming in Paris range, an exciting range introduced at the right time of Paris Olympics. And this was a new bath and body range that is really getting a lot of momentum, and innovative packaging and design. On the Kay Beauty, just to talk a little bit about the case study on foundation marketing. At any launch, we do a lot of marketing. Almost 40 million impressions were generated, and this particular product achieved 2x faster growth than the category. And in fact, ended up being 10% contribution to Kay Beauty GMV for the first quarter. And a lot of very interesting content delivered through Katrina and then also the influencers. Next.
So I think overall, we are really pleased that our beauty House of Brands, which is, you know, the entire bunch of beauty brands that we own, are growing at 47% year-on-year growth. And, this has been fantastic, and it's also come in a very balanced way, where the growth is coming not just from Nykaa's online and store platform, but also beyond that, the growth is coming through GTMT as well as, other platforms. Other platforms don't contribute meaningfully, but they are... I mean, these, many of these brands are also listed on other platforms sometimes. Next. On the fashion, it's a similar story. I think though the growth has been subdued and fashion brands have been subdued, however, this is due to, channel degrowth in 3P channels, where they've degrown at 14% year-on-year.
However, this is compensated by the GMV growth on Nykaa Fashion platform, where they grew 10%.... Again, I think this performance is a bit disappointing. I won't read into it as a long-term trend, and efforts are on to increase the innovation and performance of the fashion brands. Next. I think we also today announced that, we have expanded our stake in Dot & Key now to 90%. Just to remind all of you that Dot & Key is a differentiated skincare solution brand that is effective, safe, and fun to use. It was established in 2018, June 2018, and it's been profitable since fourth quarter of 2023.
Nykaa acquired 51% stake in Dot & Key in September 2021, and since then, we have, we've together, both the founders and Nykaa, have been growing the brand at a fantastic pace. Where, in fact, by financial year 2024, it had grown 9x from, you know, three years earlier. So 9x growth over three years, and this growth continues to accelerate. And if you were to look at quarter one of financial 2025, the GMV is now at annualized run rate of INR 750 crores. So, this has been a fantastic investment by Nykaa, and Nykaa has decided to go ahead and acquire additional 39% stake at a cost of INR 265 crores for 39% stake. Next.
So what we like about Dot & Key is it has differentiated assortment, you know, like waterlight, vitamin C, sunscreen, SPF based lip balms, cooling watermelon sunscreen. It also has clutter-breaking packaging. Unique and patented hat cap packaging has become a standout feature in the market, drawing attention and fostering brand loyalty. And finally, they also tend to focus on core categories like sunscreen and moisturizers, which constitute a very large part of the skincare category. So this gives presence to Nykaa in some very important categories. Next. And, Dot & Key has also invested in innovation and R&D capability of their own. 28 new SKUs were created by this team in the financial year 2024 alone, and they account for 30% of NSV for the brand. And this is a rigorous and agile NPD process, very well-defined and structured process.
In fact, just to give an example, 62 trials of sunstick were done before the final product was delivered. There is that type of passion that the team has shown in trying to get the product right. And also a lot of agility and innovation. They were the first to launch barrier repair range. And this as a result, we enjoy a lot of brand love. Average rating of 4.4-5 on Nykaa platforms, with 35,000 reviews and 85% of reviews are positive. Most love reviews are on product quality and innovative packaging, and most reviewed products are moisturizers, sunscreen, and face wash. On the customer perception, we are aware that this brand retains 45%-50% of their customer.
This is based on their own website data as well as Nykaa platform, and it's a very exciting number from a customer retention perspective. And, also a lot of social engagement through Instagram, followers of 370,000, and very high engagement rate. And organic traffic to the website is almost 70%. Proof of the pudding that it's a well-loved customer brand. Next. Nykaa's also acquiring majority stake in Earth Rhythm, as announced today. Earth Rhythm is a D2C new age brand specializing in skincare, makeup, haircare, and bath and body products. Quite a wide range, but it comes from... They were established in 2019, and they have about 250 SKU. But this comes from a philosophy that, they want to be a sustainable, clean brand, and I'll talk more about it later.
Nykaa took a minority stake in Earth Rhythm of 18.57% in April of 2022, and today we've, we've announced acquiring a majority stake in the company. The GMV of this brand has, of course, grown 8x over the last three years, but albeit from a very small base, so it doesn't—it's not as meaningful as when you grow similarly when you are larger. But hopefully, the same growth momentum continues. In the quarter one of 2025, if you were to analyze, the GMV comes out at INR 55 crore. Next. So what we like about this brand is it's, it has a very differentiated positioning. It's sustainable and inclusive. It's certified organic, plant-based, 99% plastic-free. It's good for you and good for the Earth.
Earth Rhythm isn't just their name, but it's a commitment to producing the purest, healthiest products and educating everyone on why being earth-conscious is so important. That's what we like about the positioning of this brand. They have innovative shampoo and conditioner bar solution, which is eco-friendly packaging, design using recyclable materials. But what is more important is that lower water consumption, because of the production and application format that it uses. Similarly, they have a lot of reusable accessories, including reusable makeup accessory, so that they, you know, we can reduce wastages. It's also inclusive and gender-neutral brand ethos across all skin tone, age, and gender. It's gender-neutral and highly inclusive in diverse communication. You can see all of the, you know, the certified, cruelty-free, all of the, you know, advantages it offers to a planet-conscious customer.
On the R&D side, again, this is a fantastic company from an R&D perspective. 50%+ innovation in financial year 2024, through 15 new SKUs that were brought out by the team. And in-house testing and stability studies enabled to save costs and give high-quality formulation... They also have many first, in their, you know, repertoire. It, it's India's first water-free sunspray. Also first to launch breakthrough products such as gel-to-milk series, as well as phyto series. So very innovative products the brand is able to bring about. But yeah, I think the brand's true might in terms of distribution, performance, and marketing is not yet into the brand. And I think the, with the ownership by Nykaa, I think many of these will follow. Next. On the financial performance side, I now request Ganesh to come in.
Thank you, Falguni, and, good evening, everyone. I'd like to walk you through the financial highlights for the quarter. So as we can see, for the quarter, GMV grew well at 25%, with beauty growing at 28% and fashion growing 15%. In terms of revenue growth, it came in at 23%, which is in line with the two-year CAGR. As far as EBITDA is concerned, EBITDA margins expanded by 30 basis points during the quarter, with a higher than revenue growth of 31%. And as Falguni mentioned, we do have the GCC expenses and a few restructuring expenses which are not there in the base. So if we were to normalize for the same, then the EBITDA expansion is much higher at 90 basis points. Going to the next slide.
This is a summary of the P&L, and as we can see, this is a reflection of the strong growth, both in terms of top line as well as in terms of bottom line. Going ahead. Now let's turn to the vertical performance. Starting this quarter, as you're aware, we are commencing vertical by segment reporting. So the beauty vertical now additionally includes our eB2B distribution business, which Vishal covered, as also the grooming business of Nykaa Man. The fashion vertical now additionally includes the lifestyle business of Nykaa Man and also our content platform, LBB. The Others vertical is mainly comprised of our newer businesses, which is our GCC business at this point in time. We had also shown the data for FY 2024 on this revised segmental reporting basis at our Investor Day as well.
So we have also provided the last four quarters vertical reporting as per this new definition, as part of the annexure to the Investor Day, so that the comparability of numbers and how the quarterly numbers, as per the new division definition would have been last year, is readily available. Yeah. We'll now spend some time looking at some of the key highlights of the vertical reporting. We can go to the next slide, for that. So as we can see, on an overall basis, our gross margins improved by 48 basis points YoY. While gross margins in BPC remained largely steady, our fashion gross margins in Q1 improved by 360 basis points on YoY basis, primarily driven by higher marketing and servicing income.
On the expense front, our marketing expenses were up by 31 basis points, primarily in BPC, as we continue to focus on new customer acquisition through strong marketing campaigns. Fashion marketing expenses improved YoY due to better customer mix and conversion. Selling and distribution expenses were up by 44 basis points, with increased share of eB2B business, as well as own brands expansion on third-party channels. This has led to marginal increase in S&D expenses in BPC. As far as fashion S&D expenses are concerned, this showed a marginal increase due to Nykaa EBO expansion. Fulfillment expenses for fashion came in lower, with a 160 basis points improvement YoY, on account of better control on leakages, reduced RTO shipments, et cetera.
As a result of scale efficiencies and cost optimization, we have seen improvement in other expenses to the tune of 86 basis points, mostly driven by BPC. While in fashion, we continue to invest both in tech as well as in terms of employees. Moving to the next slide. What we can see over here is our sustained focus on efficient capital utilization. It continues to deliver strong results. So as we can see, whether it is in terms of fixed assets turnover ratio, which has improved from 9.1x last year to 10.3 in the first quarter this year. Similarly, working capital days have continued to steadily improve over time. Similar...
And on the same basis, we can also see improvement in ROC, which has also started coming in on a consistent basis. I'd like to just highlight that as far as fixed assets turnover or ROC for quarter one are concerned, these are annualized numbers. Moving ahead. This slide gives you a snapshot of the restructuring initiatives, as well as the recent acquisitions that Falguni spoke about. So to streamline and consolidate own brand business in a single entity, FSN E-Commerce Ventures Limited, which is the parent company, the listed entity, completed the acquisition of western wear and accessories business from Nykaa Fashion via slump sale in quarter one, FY 2025.
The board of directors at its meeting held today has also approved for acquisition of further stake in Dot & Key, which will take our stake to 90%, as well as in Earth Rhythm, which will make it a subsidiary of the company, both of which were covered by Falguni in her address. With that, yeah, the floor is open for questions.
... Thank you, Mr. Ganesh. We will now begin the question- and- answer session. If you would like to ask a video question, please click on the Ask a Question tab, and separately, you can also type in your questions in the text box mentioned below the video player. Before asking the question to the management, please introduce yourself, providing your name and your organization name. If possible, you may switch on your video as well. Please limit yourself to maximum of two questions so we can accommodate as many as possible. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Michelle, are you seeing any questions?
Yes, ma'am.
Sorry, go ahead.
The first question is from Sachin Dixit. Please accept the prompt, introduce yourself, and proceed with your question, sir.
Hi. Hope you can hear me now.
Yes.
Great. So Falguni and team, congrats on a decent set of results. I think we are on track to a bunch of things that we did highlight in the, in this day that we conducted in June. Just one thing that I wanted to understand, particularly on fashion side. I do understand that this was a really tough quarter for fashion businesses as such, especially online businesses in particular. But the 20% odd growth that we have achieved compared to the ambition that we guided just, like, 20 days back before we published the quarterly update, those numbers are quite off, right? If you look at the 2x-3x NSV growth in three years, implies close to 30%-35% odd growth, while we delivered 20%.
So I think I had pointed out at that time also, and I would like to point out, that very often the growth also happens in step function rather than. It's still early days of the business, and the growth sometimes happens in step function. So you are aware that, we've announced a Foot Locker alliance association where, we are gonna represent all the Foot Locker's e-commerce demand in the country, and that launch is gonna happen in October of this year. So at this early stage of business, we had cautioned that there is seasonality to the business, and also there is, you know, there is a step function improvement in business that happens due to initiatives that are being taken periodically.
I mean, I had cautioned that this business is not mature enough to assume that that is what it will translate to as a every quarter growth.
Yeah, I think just to add one statement is, I think this quarter, even last year, you'll have noticed a slower growth. Basically, Indian wear, like, it is a big category, so there was an expectation that this quarter might be a little lower. But the other quarters, as Indian wear picks up, even last year, as you'll go back to the last four quarters, had good growth.
Got it. My second question is quickly on Nykaa Man. I do understand that we have merged the pieces of it within fashion and beauty. Is it really gaining any traction? Are we seeing sustainable business being achieved there?
Sorry, can you repeat your question?
On Nykaa Man.
Mm-hmm.
Because we have a separate platform, can you talk about what's the traction we are getting there? I mean, we haven't heard anything happening in particular on that piece.
No, we are happy with the progress on Nykaa Man. We always wanted to grow it in the right manner in terms of, you know. We do believe that if platforms are patient about the growth, you get the right customer acquisition and continue to grow. But yes, we've seen good traction in the Nykaa Man growth.
All right. I'll get back into queue. Thanks.
Thank you. The next question is from Kapil. Please accept the prompt, introduce yourself, and proceed with your question.
Hi, can you hear me?
Yes, sir. Please proceed.
Thank you so much. Hi, this is Kapil from Nomura. Thanks for the opportunity. I was just noticing the trend of margins, and we are seeing good improvement in margins across verticals like fashion and also the Superstore segment. Beauty segment has been operating more in a range. So how should we think about it going forward? Will it be that beauty will operate more in a range with modest improvements, and bulk of the margin improvement has to come from fashion and other other segment starting to turn around? Is that the way to think about it? What will be the drivers for beauty business margins? These are the questions.
I think because it's a new way of reporting, because I think one of the expectation everybody had was on EBITDA, and we can't give a lot of segments in the EBITDA reporting. So I think it's a new way of reporting, so let it settle down, and rather than read too much into what the margin improvement or dis-on improvement is. I would just like to caution that, yes, fashion margin, gross profit margin look very good, but there are quarter-on-quarter differences, and I would say that some of it is definitely non-core, so I wouldn't read too much into it. Similarly, on the beauty side also, you know, it's been at a good level.
You know, I think in the presentation you saw that in Nykaa D, I think they are consciously trying to improve the gross profit margin based on selection of the right brands and right, right choices being made with a clear conscience to improve the net retention margin. So I wouldn't read too much into it. I think margins are not a problem, but I wouldn't also read into, you know, huge amount of improvement. But yes, there's some improvement in fashion margins, but this improvement reflects both some core and some non-core.
Yeah, okay. Can you just talk about-
I mean, margins are not non-core, but the comparison is non-core, because there could be some adversity in the base also.
Sure. So can you talk about what can be the margin drivers for particularly beauty business from here?
Yeah, maybe would you like me to come in?
Yeah, sure.
Yeah. So I think, as we have mentioned earlier, the beauty business now, from a vertical reporting perspective, consists of three very different types... four very different types of businesses. One is Beauty.com, the second is beauty retail, the third is Nykaa's B2B Superstore business, and the fourth is own brands, right? So each business has its own respective drivers for improvement in margins. If I look at the Beauty.com business, which is at least in terms of share of revenue mix to this vertical, is the most significant. That business, as we've said in the past, is already in a very, very healthy place from a margin profile perspective, both at the gross margin level, but even all the way down to contribution margin and EBITDA margin.
So that business is in a very healthy place. What are some potential levers to improve the margin profile on that side is, as we've said in the past, if our own brands continue to do well, and if they grow faster than the growth of the platform, and they take a larger share of total business, then that should have a positive impact on the gross margin profile. Secondly, you know, we've been working on a lot of ad formats for our ad platform. As you know, we collect services income, and we're working on multiple new ad format initiatives, so there is a potential for that also to improve the services income and therefore the gross margin.
Finally, there is operating leverage that will kick in, because a lot of the cost, especially on employees, is fixed. And also marketing, we feel our marketing expenses are in a good place. So I think, you know, depends on the business within the vertical. So Beauty.com I spoke about. If I look at own brands, of course, that business is a strong business from a gross margin perspective, so it just needs to keep growing and growing faster than the overall platform. And finally, the biggest lever, of course, will be now Nykaa's Superstore business, Nykaa D, which now sits within the beauty vertical. And that's where we see the potential for the largest improvement in margins, which Vishal covered in his presentation.
Yeah, so the most meaningful improvement in margins is most likely to come from the youngest business, which is still in growth phase, which is the B2B business. However, since currently it's a small percentage of total revenue to the beauty vertical, the most outsized impact on the beauty vertical in terms of margin will continue to come from the Beauty.com and beauty retail businesses.
Thank you. Have a good day.
Thank you. The next question is from Vijit Jain. Please accept the prompt on your screen. Introduce yourself and proceed with your question.
Hi, can you hear me?
Yes.
Sir, please proceed.
Yeah, thanks. Sir, my first question is, you know, just for comparison's sake, just wondering, you know, in the beauty business, what the contribution margins would have been like, in the earlier reporting? I can see here, you know, I mean, there's a 20 basis points YoY decline in EBITDA margins, and, you know, contribution margins are also down 150. I imagine most of it has to do with B2B, right? Because B2B is obviously growing faster than B2C. So I'm just... That's my first question. Just for comparison's sake, what would it, what would it have been?
No, I think we gave all of the past comparison, and I think we can't keep giving, you know, this-
Fair enough.
But you should also know that we have consciously improved the marketing expenses for beauty business, as evident in the new customer acquisition and growth. And, yeah, there are some elements like fulfillment expenses going up is partly due to B2B, but because, see, it's already in the base, right? So even the quarter one 2024 is restated.
Right.
It's just that weightage is going up, so but the weightage of B2B business is not that significant yet.
Mm-hmm.
But also we talked about, you know, express delivery that we are now focusing on as same day, next day delivery.
Right.
It doesn't increase the cost massively, but yeah, some choices are being made about, you know, how we send our parcels, in a way that, you know,
Yeah
... the delivery is faster. So I think, I would say it's a mix. I wouldn't read too much into it.
No, no, but I think-
But overall, everything individually is improving.
Yeah.
Sorry.
Vijit, Vijit, if you just look at our quarter-
Yeah, yeah
results from last quarter, I mean, that'll tell you what the contribution margin was for the beauty business, excluding the B2B business. So-
Hmm.
What I can tell you directionally is that it hasn't changed. The contribution margin for the vertical, excluding the B2B business, hasn't changed meaningfully since last quarter at all.
Okay.
So what you're seeing here is, you know, because of what we've now added to this vertical.
Got it. Thanks, Anchit.
Also, I'd like to add-
Yeah.
Also, I'd like to add that we have shared the comparative numbers as per the new definition for the last four quarters in the investor deck in the annexure.
Right.
So when you look at that, that will give you a good idea.
Thanks, Ganesh. Yeah, and my next question is, you know, just looking at the house of brands slide, right, on both beauty and fashion. So beauty is obviously growing very well on the house of brand side, 47% YoY, whereas fashion is down a little bit. So A, my question is: Is fashion down mainly because of the Indian wear, the point you mentioned earlier on, and the innerwear is doing relatively better? So we should read into it in that context. And within the beauty, the 47% YoY and the channel mix overall for the BPC business, just looking at the YoY chart looks a little, you know, interesting. So if you could, you know, explain what is happening there.
I mean, I can see the, you know, Nykaa stores, for example, is down, meaningfully in terms of channel mix for own brands. And, you know, others is meaningfully up. So I'm just trying to get a sense of, really what is happening there for the own brand part.
So, Nykaa is a complex company now, and you can't read so much into it, because honestly, like, there's a lot of weightage of Dot & Key, which doesn't have a large representation in our stores.
Mm-hmm.
We are just starting to roll out Dot & Key in our store in a meaningful way. So some of the mix is affected by that. I think, on the beauty, consciously, like, Dot & Key is also sold on other platforms, and some weightage of other platform comes through that.
Okay.
GTMT clearly is a conscious strategy to continue to grow it, because we believe that once brand reaches certain size and scale, they need to grow beyond Nykaa's own platform. We now have three brands that have reached a certain size and scale. So say, Kay Beauty is now increasingly going into, you know, GTMT. So I think it's a mix of many things. So I think reading the relative importance of channels from this slide is not what can tell you what exactly is going on, and because there are quite a few brands.
Okay.
Talking about the fashion brand, definitely, you're right, the lingerie brand is doing well on all, most of the channels. And but besides Indian wear, I mean, ethnic wear brands, I think the western wear brand in fashion has had a tough quarter, but we do believe that it will be revived and it'll grow from there. And the quarter was tough due to two elements, mainly on third-party platform, where it has been listed on Myntra and a few other platforms.
Mm-hmm.
It didn't perform as well. On Nykaa platform, it did well.
Got it. Thanks,
Just because I wanted to add, sorry, on the beauty brand side is... You know, we have to just keep in mind that this is a mix, and it's not indicative that any particular channel is degrowing, right? So let's make sure we understand that all the beauty own brands are growing across all the channels.
Mm-hmm.
It just might happen to be that, for example, others, it's coming off of a smaller base, right?
Mm-hmm.
So maybe the growth is higher relative to the growth on, for own brands on Nykaa's own platform, where their share is already high. So it's also a factor of coming off of a small base, and therefore, it's showing a much higher growth relative to some of the more established channels. But all the channels are growing for the own brands.
Got it, Anchit. Thanks. Just one last housekeeping question. The adjusted EBITDA metric . So you highlighted that, you know, it includes GCC, ESOP expenses, and restructuring expenses. Just needed to know what the quantum of the restructuring expenses would be, within that adjustment.
It's difficult to give that details here.
Okay.
But, I think maybe you can contact our team finance.
Yeah, yeah, we'll do that.
Platform.
Yeah, we'll do that. Thanks, Falguni. Those are my questions.
Thank you. The next question is from the line of Latika Chopra. Please accept the prompt on your screen. Introduce yourself and proceed with the question.
Hi. Thank you, you know, for the opportunity. I'm Latika from JP Morgan. Two questions from my side. The first one was on your initiative to, you know, cut down the delivery time and, you know, around the express delivery. I wanted to understand, you know, what is driving this, you know, push? Are you sensing any changes in the beauty retail landscape, which is, you know, motivating you to go for a faster delivery? And the second part is: Is there any considerable cost that is going to be associated with the same? The second question was on your B2B business. If you could give us some color on what are the top product categories, you know, that you're selling under this business.
There was also a packaging cost reduction that you mentioned on one of the slides. What is exactly driving that? Thank you.
Yeah, maybe-
Yeah. You wanna go, Anchit?
Maybe I'll kick it off. If you go to the previous slide on O2D. So I think, Latika, the reality is that, you know, we, when you build a business in the e-commerce space, there are only three things that matter. One is, or at least in our mind, that's curation, it's convenience, and it's content. And a big part of convenience is the speed with which we can deliver to our consumers. So it's always been a priority to us, and as you know, we've spoken many times over the past two years, that we took this up as a bigger project coming out of the pandemic, because, of course, there was an accelerated adoption of e-commerce during COVID, and coming out of that, we wanted to capitalize on that demand.
So we realized that it was very important to be very competitive from a speed and therefore convenience point of view. And that's the investment which we've now made over the past three years. So it's not a new investment, it's not something which we're picking up now. We're kind of sharing with you the culmination of the past three years of work which we've done in terms of expanding our warehouse capabilities and capacity, but also, equally importantly, improving our supply chain, both from a forecasting as well as from a, you know, from a hygiene perspective. So I think a lot of work has been done over the past three years. And because we now have something which we feel is very much worth sharing, that's why we've shared the results of it today.
But this is not something that has happened overnight, it's been something we've worked on for many years. So to answer your question, no near-term trigger. It's been something we've worked on for a long time, and you're now seeing the results. I hope that answers your question.
Any cost that could come incrementally on account of that or not really, because this has been in the works for long?
Yeah, I think you've seen... I mean, over the past two to three years, you've seen the amount we've invested behind expansion of warehouse capacity, right? So that was probably a decent amount of the cost, at least from a, from a CapEx point of view. Going forward, I mean, as we continue to expand on this commitment to deliver same day and next day within the major metros and the top 100+ cities, I think there is some amount of cost that might come into the picture on the last mile fulfillment, but I don't think it should be very meaningful. So I do believe a lot of the heavy lifting is now behind us.
Yeah, no, what I'd like to add is that, honestly, while there were investments and costs, but I think on unit economics, the whole project is self-supporting because, what gets added as a cost gets saved through last mile delivery. In certain cases, it gets savings through some other areas. So net-net, it's not expensive to do this from a unit economics perspective.
Understood. Thank you.
Hi. Coming to eB2B, I think your first question on packaging cost. See, we have a very, I must admit, frugal mindset when it comes to costs. So what we have been driving for last, I think six, seven quarters, is that a lot of our outer packaging, we are reusing, recycling, you know, from the brand boxes. So that really reduces our cost quite a bit. Yeah?
Sure. Any flavor on what are the top products or categories, you know, for this business?
Yeah, yeah. So, see, we obviously play in the BPC category, and more or less, it's in line with the kind of the market which is there in the GT environment. So categories like hair, personal wash, are bigger than some other categories. But equally, because of the nature of our service, categories like makeup, although smaller in size, but are bigger relative to the market size. So bigger with us, related to the market. Yeah?
Also fragrances also.
Yeah.
So you have quite a well...
Yeah.
Fragrances also, so you have a well-distributed business.
That, that's right. And fragrances are one of the, is actually the fastest growing category.
Skin also, so it's pretty balanced also.
All right. Thank you. Thank you so much, everyone.
Thank you. The next question is from Harit Kapoor. Please accept the prompt. Introduce yourself and proceed with your question. Mr. Kapoor, please unmute yourself and speak.
Am I audible?
Sir, your audio is feeble. May I request you to kindly speak little bit loudly?
Yeah. Can you hear me now? Is this better?
Yes, sir. Please proceed.
Yeah. Hi, good evening. I just had two questions. One was on the BPC side. So, you know... Can you unmute? Yeah. Can you hear me? I'm sorry.
Yes, sir. Please proceed.
Yeah. So, my question was on the BPC side. So if you look at the, you know, if I just do a revenue minus NSV kind of quick calculation, it seems like maybe the advertising incomes which have picked up in BPC this quarter, I might be wrong, but that's my assumption, based on that calculation. And given that, you know, from here on, some of the discounting, led issues which we were speaking about last year starts to come at the base, I was just wondering, are these two likely gross margin triggers, for the online BPC piece going forward over the next few quarters?
Yeah. I think you're right. Although, you know, there's more than just services income that sits between NSV and revenue. But yeah, I mean, as we said in the past, there was definitely some softness in services income over the past couple of quarters because of, you know, external challenges, especially to D2C brands who were having a difficult time with funding, and there was a big push towards profitability. But I think a lot of the brands have realized that if you do not spend on advertising on a platform like Nykaa, then growth becomes very hard to come by. So that's where we're seeing a reemergence of a lot of these D2C and younger brands who are now back to becoming more active in terms of marketing on the platform.
That's a positive trend, which we think should strengthen as we get into the second half of the year, which tends to be where most of the festive occasions are, and a lot of the seasonal and festive shopping for this category will occur. So I would say we're optimistic for the second half of the year on the services income piece, and that should be a driver of improvement in gross margins as well. To your point, you know, the discounting has been there because of the soft consumer demand across discretionary categories. So again, it's a lot of that moderation in discounting will happen if the demand does revive, as people are expecting it to in the second half of the year. So as you know, it's meant to be a very...
It's meant to be a busy Q3, Q4, with lots of, auspicious dates and lots of festivals. And I think a lot of retailers and consumer companies are betting on a revival in demand, and so are we. And I think if that happens, you will see the discounting should moderate, and, that should again help, reduce the build-up.
Great. Thanks for that. I just had one more on the marketing and ad, and advertising side. So, on, you know, you've seen the, you explained the increase in the marketing spends being driven by, you know, the, the intent to kind of drive new customer acquisition. Shouldn't we expect this kind of uptick to sustain on, on your expenses, given the fact that, you know, the, the medium to long-term strategy is to kind of drive revenue growth at a faster pace? Is that right way to think about it?
You're referring to the beauty segment's marketing?
Yes, just, just beauty. Just beauty. Yes, yes, yes.
You know, beauty marketing spend source is a combination of, Beauty.com as well as beauty private label brands. Marketing doesn't include anything for Nykaa D because they don't spend on marketing. So it's a combination of two, this thing. We clearly do see ability to continue to grow our beauty private label brands, and some more marketing investment will go there consciously, not because we have to do it. We just feel it's the right thing to do. Similarly, on the e-commerce side also, we definitely want to increase the acquisition in terms of new customer acquisition.
Okay.
Yeah, but I think that being said, you know, because it's, we're operating at such a large scale here, that even if we were to meaningfully increase the ad, the marketing spends in dollar terms, it wouldn't be a commensurate increase in terms of the, as a percent of sales, you know? So even this, even this past quarter, where we spent, where we had the highest customer acquisition quarter we've had in a long, maybe ever, yet you see that the increase in, increase in marketing spend was about 60 basis points. So I think you'll see it be range-bound. Yes, we want to continue to acquire new customers, and we want to continue to build brands, own brands.
So there is some amount of marketing that will continue to be done, but I don't, I don't think you'll see it move in a very volatile fashion or by a large magnitude. It'll be pretty much range-bound, I think, somewhere around the 8.5%-9%.
Great. Those are my questions. Thank you. Thank you very much.
Thank you. The next question is from Karan Taurani. Please accept the prompt on your screen. Introduce yourself and proceed with your question. Sir, please proceed. Mr. Taurani, please unmute yourself and speak.
Yeah. Is it fine now?
Yes, sir. Please proceed.
Yeah. So my question was on the margin side. You mentioned that 8.5%-9% is what you should see in terms of sustenance for the B2C business. Now, the major levers, right, and one is in terms of ad revenue seeing traction. You know, second is in terms of, you know, going, you going for, you know, lower lead times, and that probably improving in terms of customer experience. And third, of course, you know, lower losses in the eB2B business side and also private label. So, you know, despite having so many levers, and also discounts moderating from year on going ahead, as we indicated, so despite having so many levers, what makes it that, you know, you're confident of improvement in terms of margins for the BPC segment?
No, so I don't think I guided to 8.5%-9% EBITDA margins. I said that marketing expense will most likely be range-bound, at around 8.5%-9%. In terms of EBITDA margin, I think you summarized it well. There are many opportunities for us to continue to improve, the margin. But again, I just want to, go back to what I said earlier, which is the BPC segment here, from a vertical reporting perspective, consists of three different businesses. The e-commerce business, yes, it does have some levers for it, for us to improve the margins, but we already feel like it's operating at a very, very healthy EBITDA margin.
Whatever improvements we do manage to get, we want to continue to invest behind customer acquisition as well as customer retention. So that's the, that's on the Beauty.com side. Obviously, on the B2B side, where there is the largest magnitude of improvement in margins possible, however, because its revenue is still very small compared to the multi-brand retail channel, whatever improvement happens in profitability will not be able to move the needle meaningfully at the segment level. But at an individual business unit level, B2B will have meaningful improvements in profitability. And even though Beauty.com has the potential to improve from here, it's just already in such a healthy place that we want to reinvest those, those savings into into continued growth.
I think it's reflecting the fact that we're delivering 25% +, sorry, 28% growth on GMV for beauty and personal care off of a very large base, in a discretionary category that has had a very muted quarter in the past three months, and I'm sure you follow results from all the various FMCG and retailer names, so it should not come as a surprise to you. So I think in a difficult environment, we delivered market-beating growth, in large part because we continued to invest behind that growth, and that will continue to be the focus for the Beauty.com business in the coming quarters.
Right. So the second is a follow-up on the same thing. So let's say if the Beauty.com margins are similar and you plan to invest behind customer acquisition, can growth rates then accelerate beyond 25%-28% in the BPC business?
See, I think, Karan, I think most of your hunches are correct. All we are saying is, we are not, we don't want to guide for anything very incremental. But I think we are very sure that each of our business margins are great or they are improving. The mix, obviously, determines the overall Nykaa numbers. And, yes, the B2B business, which is a very fast-growing business with improving margin structure, but overall, EBITDA margin of their business is negative, right, right now. But I think it's not, it's not gonna usually pull it down because the bigger businesses are all turning better on EBITDA margin, including the private label beauty business. So beauty's private label business, Beauty.com business, is in a good place with tendency towards improvement in margins, with B2B as a mix pulling down the margin, and it'll settle somewhere.
Also, in terms of customer acquisition, when you actually go for an accelerated customer acquisition, obviously, the benefit of that, because all our customers buy 3.5 x in a year. That's the average, right? So it does give you long-term benefits. So it gives you benefit not just in that quarter, but also in quarters ahead. So overall-
Right.
I think we do feel the business is in a good place now, and a lot of-
Right.
corrections we needed to do are behind us.
Right. So basically, in terms of cost moderation, one could either see a margin expansion or a growth acceleration over the medium term as a part of supplies. Is that a fair understanding?
And also the benefit of other expenses going down also comes because of scale, allowing us a little bit of more leeway to improve some other areas that we may not have done. Like, we've not done any kind of large brand building activity for a long time. So we may periodically do something. I'm not guiding towards any large spend, but I'm just saying that the way things are moving, it gives us ability to invest for the future.
Got it. Perfect.
Yes.
Thank you so much.
Thank you. Ladies and gentlemen, that was the last question we can take today. You may reach out to Nykaa's Investor Relations team for any additional queries. I would now like to hand the conference over to Ms. Falguni Nayar for closing comments. Over to you, ma'am.
No, thank you very much, everyone, for being here with us, and thank you to my management team also to always be available. And, thanks, everybody, and I hope we've answered all your questions. And if there's anything more, do reach out to our IR team. Thank you.
Thank you, ma'am.