Myntra's private brands business posts profit

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Online fashion store Myntra on Thursday said the company’s private label business, called Myntra Fashion Brands, has turned profitable while the company is on course to clock profits by the March quarter of the current fiscal.

Chief executive Ananth Narayanan said Myntra Fashion Brands, a portfolio of 13 brands owned by the company, currently clocks $300 million in sales on an annualised basis, implying monthly sales of $25 million. This is about 23% of the company’s overall sales.

Retailers usually fall back on private labels to improve margins and its path to profitability. These are essentially brands which are owned by the retailers, where they control everything from sourcing and manufacturing to distribution. A control over supply chain and distribution helps brands command a better margin for private brands as against third-party brands.

“The Myntra Fashion Group clocked an EBIDTA (earnings before interest, depreciation, taxes and amortization) of 5% in June. This is the first step in reaching overall profitability. We expect to turn profitable by the last quarter of this fiscal,” said Narayanan.

According to Narayanan, one of Myntra’s earliest private brands Roadster, at an annualised revenue run rate of $100 million, is the largest brand on Myntra in terms of sales. Other large private brands include Mast & Harbour and HRX, each clocking about $25 million in annualised revenue.

Myntra, a wholly-owned subsidiary of Flipkart, has also started selling the private brands on Jabong, the online fashion store it bought from Rocket Internet in July last year in a cut price deal for $70 million. In the three months since their launch on Jabong, the private labels account for about 8% of Jabong’s overall sales.

Narayanan, however, maintained that Myntra would remain a multi-brand platform and the contribution of private labels will not exceed 35-40% of Myntra’s overall sales in the next 18-24 months.

“Our private brands have performed exceptionally well. Our approach of building own brands makes us unique. Myntra Fashion Brands is a key pillar of Myntra’s strategy to build differential offering, cementing shopper’s loyalty and increasing profitability. Myntra Fashion Brands today occupy nine of the 20 brands on the platform,” said Narayanan.

Myntra, which was acquired by Flipkart in 2014 for about $350 million, is by far the largest online fashion store in the country and an important weapon in Flipkart’s arsenal to maintain a lead over Amazon. Fashion is an important category for online retailers because of higher margins and high repeat purchase. For instance, margins in fashion could vary between 20-50% as against 3-7% margin for electronic devices and mobile phones.