Here’s why Nykaa’s products are a hit, but the stock isn’t

wealth desk

To buy to sell FSN E-Co Nykaa share

Retailer of beauty products Nykaa has been able to increase its sales — and its products are hardly cheap — but the stock market isn’t as excited as its customers. Shares of FSN E-Commerce Ventures (Nykaa), which had a stellar debut on Dalal Street last November, lost around 32 percent because SEO.

Two factors weigh on the title: the burden of past expectations and the fear of increasing competition which could reduce the profit margin. Some of the company’s recent moves – including the appointment of Flipkart’s head of marketing Vikas Gupta as CEO of the business-to-business (B2B) vertical – have led the market to believe that Nykaa may be aiming for a bigger market share. . at the expense of the profit margin.

The company will release its quarterly results on Friday.

Nykaa, share price, Indian stock market, share price Evolution of the Nykaa share price since its listing on November 10. (Source: BSE)

In order to generate a compound annual growth rate of 35-40% in the gross value of beauty and personal care products over the next 5-6 years, the retailer of beauty and wellness products will need to go mainstream, according to a report by ICICI Securities, a Mumbai-babrokerage firm sed.

Nykaa places a strong emphasis on merchandising, brand assortment and exclusivity, focusing on premiumization and upselling – as opposed to the discount-driven tactics adopted by its competitors – and an omnichannel strategy that offers customers with options to browse and buy.

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Additionally, Nykaa could risk tarnishing or losing its brand image as a high-end beauty destination as it expands its business model and offerings to include mass segments, non-luxury items or adjoining categories. , had warned the national brokerage firm.

(Source: Nykaa website)

Analysts worry that reaching out to a wider audience will squeeze margins and dilute the brand. “We would be concerned if Nykaa slowed down on content or innovation, or even changed its strategy from not offering discounts to offering discounts in the interest of retaining market share,” Morgan Stanley said in its statement. report dated January 30, 2022.

Nykaa currently holds a 28.6% market share in India’s online beauty and personal care market, as estimated by ICICI Securities.

Despite all the fears, however, no one has currently rated Nykaa’s shares under the “sell” heading.

Nykaa, share price, Indian stock market

First post: STI

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