FirstCry's Growing Pains
FirstCry went on a tumble soon after its Q3 results. Shares declined for four consecutive sessions, hitting a fresh 52-week low of ₹207.05 on Thursday. And while the stock rebounded to close the week at ₹219.60, this is still 47% lower than last February.
Is this a sign that FirstCry’s moat and its competitive edge in the kidswear and mother care segment have worn off?
The quarter wasn’t disastrous. But it left investors uneasy. And in public markets, uncertainty can hurt more than bad news.
By going from kidswear and baby care to the parenting journey and building a strong offline retail presence, Firstcry achieved scale, but is the weather changing for such vertical marketplaces?
When we look at the Q3 performance, it’s clear that revenue has grown and margins improved, but losses more than doubled to ₹38.4 Cr from ₹14.7 Cr, on the back of 12.7% higher expenses (YoY) at ₹2326.6 Cr
The higher spending is down to intensifying competitive pressures in core categories, while supply chain issues shaved off close to 2% of additional growth as per the management.
Yet markets are rarely persuaded by hypotheticals. Soon after the results, investors responded to what was delivered, not what might have been. And the sub-10% growth rate for an ecommerce marketplace and retailer was not seen as a positive, especially when the company expanded at a materially faster clip previously.
So what changed, and why are investors bearish on the FirstCry stock?
Competition Raises HellThe primary nuance likely lies in where FirstCry has seen its growth. FirstCry’s model spans private labels, third-party brands, and a mix of online and offline channels. Its differentiation historically stemmed from curated assortment, private label penetration, and control over customer lifecycle through an omnichannel model.
But as these categories matured and as new channels such as quick commerce eroded FirstCry’s metro reach, this trifold approach seems to be weighing the company down.
While its supply chain edge and reach among brands was largely untested till quick commerce, it’s not the case anymore. This is primarily why FirstCry’s growth has slowed down.
Secondly, premiumisation is a prominent and real factor, but discretionary purchasing in certain sub-segments is more cautious. Repeat purchases from marketplaces is a rarity.
Essentials such as diapers are being contested aggressively by horizontal ecommerce, quick commerce and offline chains alike. The same is the case with everyday wear, toys and mother care products.
The consumer buying pattern has shifted dramatically towards quick commerce. Further, the management acknowledged “heightened competitive intensity in the diapering category” during the quarter. Diapering, as a segment, is margin-sensitive. Competing aggressively here may protect GMV and retention, but can hurt margins.
On the earnings call, the company suggested that competitive intensity in diapers has reached all-time high, though it did not indicate structural deterioration. Whether this is a cyclical phenomenon and the length of the road to recovery is uncertain.
For equity markets, which often price narratives rather than numbers, the shift from double-digit acceleration to single-digit steadiness feels like deceleration in growth, which results in some valuation correction.
The Supply Chain QuestionFirstCry attributed roughly 2% of growth impact to supply chain challenges in mini-horizontal categories, specifically procurement issues for certain third-party consumables brands.
This detail matters because FirstCry’s model depends on assortment depth across categories that range from apparel and toys to feeding essentials and baby care. This is the lifeblood of a marketplace. SKU breadth is crucial to increase cart sizes and profits per order.
But sourcing from multiple third-party brands is complex. Unlike private labels, where margin and supply are more controllable, third-party brands introduce variables like procurement roadblocks or manufacturing slowdown, resulting in slow SKU build-up.
The broader question is whether vertical commerce insulation is weakening. FirstCry’s thesis relied on lifecycle stickiness: once a parent enters the ecosystem, retention economics improve. But when horizontal giants discount aggressively, even high-intent categories face price sensitivity.
Margins are therefore being defended not through price escalation but through mix and operational control.
Brand Rationalisation At PlayOne of the more interesting strategic disclosures in the call was around brand rationalisation. The number of brand partners declined year-on-year. Rather than frame this as a supply contraction, it was called a deliberate curation strategy to improve unit economics and product relevance.
The company has been “rationalising lower-velocity brands” and focusing on improving inventory productivity to boost sell-through, improve working capital cycles, and stabilise margins.
Private labels, already contributing over 55% of GMV, play a crucial role here to offset lower revenue from third-party brands. But retaining the marketplace depth is equally critical.
Over-curation risks narrowing consumer choice and further alienating them from the platform.
Can FirstCry Win Back Investors?In response to new platforms such as Ozi and Peeko, FirstCry is also expanding its quick commerce play. The company competes with the bigger quick commerce players such as Blinkit, Instamart, JioMart, Zepto and others. And of course, even the likes of Flipkart and Amazon have introduced same-day deliveries on many overlapping product segments.
Firstcry Qwik, the company’s quick commerce three-hour delivery service which is still in pilot across three cities, stands in contrast to the typical 10-15 minute delivery model, but Maheshwari added that the three-hour model allows for a wider assortment and higher AOV.
There’s no dearth of competition, but FirstCry CEO Supam Maheshwari called it a “quick commerce frenzy”, adding that companies are seeking to capitalise on the trend. Saying that many competitors were operating out of single dark stores in Delhi or Bengaluru, he called quick commerce a contest of unit economics.
He further stated that it would be difficult for new entrants in the quick commerce baby and kids’ space to replicate the scale and capabilities built by established players. One example he gave was that FirstCry has 3 Lakh SKUs for quick deliveries in its core categories, which other players cannot match.
The company also expanded its rapid delivery service, Rocketbees, to 22 cities in the December quarter, up from 13 cities previously. This caters to brands working with FirstCry and other brands for same-day fulfilment.
There’s little doubt FirstCry still occupies a structurally strong position in India’s baby and kids commerce market with a strong brand and established relationships with brands. But the question is whether it can afford to compete in the essential categories and non-premium segments without burning cash either for user retention or due to competitive pressures.
While each quarter has seen a higher growth rate in FY26, the real test will be margin expansion. This will be closely watched as the fiscal year comes to a close.
Even category leaders operate within macro and competitive gravity, and disruption can come from anywhere. While some investors might see the sell-off as overdone at this point in time, this optimism may not persist without clarity on the execution from FirstCry. Even a slight disturbance in this view is likely to pile the pressure on the stock.
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[Edited by Nikhil Subramaniam]
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