Nykaa's Q4 FY26: Running vs Selling brands

Short note: Welcome to Episode 16. Please email me at [email protected] with feedback. Enjoy reading and remember to enjoy a weekend without any plans 🙃. If you like reading this newsletter, please subscribe to my non-biz newsletter: Figuring Out.

Table of Contents

• The Numbers Behind The Story

• Biz Scaling

• What's Next for Nykaa

• Arjun's Picks

Introduction

Nykaa does too much. Own stores, digital storefront and B2B. Marketplace brands and own brands. BPC, fashion and home decor. Sans numbers, it looks like a carwreck. Up close and personal, the math holds up (for now).

Founded in 2012 by Falguni Nayar, Nykaa began as an online beauty marketplace. It entered fashion in 2018, listed publicly in 2021 and presently serves customers online and in 313 stores. The company also runs its own house of brands with Dot & Key, Kay Beauty and Nykaa Cosmetics as standout performers.

It turned a profit as a vertical ecom player but its next chapter is centered around its retail innovations. Many D2C players start online and then realise that offline is still exceedingly relevant. Nykaa began as an online marketplace but seems to have come to that realization in its own differentiated way. 

The Numbers Behind The Story

Key Insights

i) House of Nykaa beauty GMV is up 64.5% YoY to ₹2,788 crore (from ₹1,695 crore in FY25). Dot & Key is doing the heavy lifting with ₹1,790 crore (64% of in-house beauty) as it expands from a digital first brand to offline (available in 1,000+ cities with 53k+ doors)

ii) Fashion NSV rose 42% (FY26 vs FY25) and outpaced GMV growth of 29% for the same time period. This encouraging trend indicates higher quality customers resulting in lower returns and reduced discounts

iii) House of Nykaa brands have a higher % contribution to beauty over fashion even with the overall GMV split 3:1 in favour of beauty. In FY26, in-house beauty brands contributed 18.6% of beauty GMV. In-house fashion brands contributed 7.8% of fashion GMV. This gap is unlikely to close anytime soon with fast-growing in-house beauty brands

iv) Nykaa added 76 stores (highest addition) in FY26 taking its store count to 313 stores across formats. It plans to add 50-70 stores each year over the next 3 years to scale to 500 stores. These outlets will increase customer touchpoints and can help fulfill Nykaa Now orders

Quarterly and full year results

In Q4 FY26, Nykaa declared a net revenue of ₹2,648 crore, EBITDA of ₹223 crore and PAT of ₹79 crore. From Q3 to Q4, EBITDA margin rose to 8.4% (from 8.0%) and PAT margin jumped to 3.0% (from 2.4%). This margin expansion took effect even as GMV and net revenue dipped QoQ.

In Q4, its beauty vertical achieved 10.3% EBITDA (up YoY from 9.6%) with fashion at 0.3% EBITDA (up YoY from -10.2%). The fashion vertical turned EBITDA positive for the first time in Q4 FY26.

Nykaa’s move towards profitability is coupled with growth as it outdid FY25 with its FY26 returns. For FY26, net revenue is at ₹10,022 crore (up 26% YoY). The gross profit rose significantly by 30% to ₹4,516 crore. The focus on enhancing margins reflects in ₹752 crore EBITDA (up 59% YoY) and ₹204 crore PAT (up 183% YoY).

🚨📈Biz Scaling by Arjun 🚨📈
I excel at building+scaling businesses and am open to partnering with a few startups to help them scale. This will enable you and your team to build faster and reach customers wherever they are. You can email me at [email protected] with the subject line: Biz Scaling.

What’s Next For Nykaa

1) Rising Margins
Nykaa’s overall EBITDA increased 25% from FY25 (6.0%) to FY26 (7.5%). Beauty delivered its highest EBITDA of 9.6% in the last 4 years, as did Fashion with -2.6% for FY26. Fashion declared its first EBITDA breakeven of +0.3% in Q4. I anticipate this continuing in FY27 and strengthening enough for a full year EBITDA breakeven.

This will boost company-level margins and enable greater reinvestment for growth. Furthermore, I envision AOVs rising as customers onboarded in FY26 mature and increase basket sizes and purchase frequency. A few of the freshly launched brands will also step up and strengthen their market positioning.

2) Quicker Delivery
Instamart, Blinkit and Zepto spent ₹1,000s of crores to educate customers about quick commerce. Second movers in Amazon and Flipkart benefited by skipping education and moved straight to acquisition. Nykaa is a similar beneficiary with Nykaa Now (delivery in 30 minutes to 2 hours). Serving users will be its hardest job, and not their education.

Quick commerce AOVs (<₹800) easily trail Nykaa Q4 AOVs-- Beauty (₹2,068) and Fashion (₹4,652). Faster fulfilment drives customer delight and safeguards Nykaa from QC majors seeking to sell higher AOV and higher margin BPC products. The vertical ecom incumbent has carved out its niche and withstood encroachment from Amazon and Flipkart for over a decade.

Nykaa has to keep its target customers in mind and not panic when QC majors inevitably expand inventory across BPC and fashion. Everything will get delivered faster in India-- speed is not the moat. Nykaa’s brand was built over a decade and it has to remember that this still takes time.

3) Retail Gymnastics
Nykaa started with a digital first identity. Over the years, it embraced its core and added complements to bolster its business. From its house of brands (16% of GMV in FY26) to Superstores (<10% of GMV in FY26) and 313 storefronts, it has kept evolving.

This evolution requires 1,000 experiments with 900+ failures. On the retail side, it has a range of formats with Nykaa Luxe, Nykaa On trend, House of Nykaa and so on. Different storefronts appeal to different customers and it is relevant to remember that niches matter and can size up. The Kiehl's partnership to own its offline+online storefront looks different from its Charlotte Tilbury tie-up, and this differs from its recent Nike collaboration.

It sounds like a mess. Is Nykaa B2B/ B2C/ B2B2C/ the-everything-store? On the back of stellar results, it has earned optionality to experiment. Running brands versus selling brands is a differentiated skillset. If done well, it might be the next chapter in Nykaa’s evolution. Remember, a focused company does not partner with premium brands just to add logos to its quarterly earnings deck.

Arjun’s Picks

a) Founders podcast about Estée Lauder: A stunning tale of a 38 year old who built an empire based on her love for makeup— I recently went back and listened to this

b) A letter to Gaël Monfils: My favourite essay of the weekend— how a generational French tennis player won without ever winning a Grand Slam

c) My Figuring Out newsletter: A blatant bit of self promotion in linking my 2nd newsletter. Subscribe for nought and read a new 2026 essay, Bottling Joy

d) Apple in China: Very keen on finally reading this book by Patrick McGee— taking my time to get to this May 2025 release

Investment Disclaimer: This newsletter is for informational and entertainment purposes only. Nothing I wrote above is an endorsement or paid promotion or financial advice. Do your own research.