Vietnam retail stocks' outlook gradually brightening

A shopping spree during the run-up to major holidays at the year-end, especially the New Year, will bolster Vietnamese retail businesses, said analysts.

The National Assembly's approval of a 2% reduction in value added tax (VAT) until the middle of next year will also stimulate consumer demand, they added.

Total retail sales of goods and consumer services in November were estimated at VND552.5 trillion ($22.75 billion), up 1.4% from the previous month and 10.1% over the same period last year, the General Statistics Office (GSO) reported.

The 11-month figure hit VND5,700 trillion ($234.66 billion), a year-on-year increase of 9.6%.

According to Maybank Investment Bank, total retail sales of goods have shown signs of improvement since September when they expanded 3.1% from the previous month and 8.4% year-on-year, the highest increase in five months.

The sustained improvement helped the 11-month figure rise 9.6%, it noted, adding that the momentum came from the country’s economic growth acceleration from Q2, with GDP growth of 5.33% in Q3, higher than the 4.05% and 3.28% recorded in Q2 and Q1, respectively.

The bank expected sales to further improve from Q4 thanks to public investment acceleration and export recovery.

Fiscal and monetary policies to stimulate consumption such as reductions in interest rates and VAT in the first half of 2023 will need more time to show a clearer impact. In addition, the parliament recently approved the extension of a 2% VAT reduction by six months to June 30, 2024, it added.

While consumer confidence is improving, the peak shopping season at the year-end will fuel the recovery of consumption, especially for non-essential goods which have been affected by the economic downturn since Q4/2022.

The business results of major retailers showed positive signs in October. Phu Nhuan Jewelry JSC, listed on the Ho Chi Minh Stock Exchange (HoSE) as PNJ, announced October revenue of over VND3 trillion ($123.5 million) and after-tax profit of VND193 billion ($7.95 million), representing respective year-on-year growth of 1.6% and 31.6% after many months of decline. This marked the company's second highest monthly revenue since February, while the October profit was only lower than January and February.

After many months of weak purchasing power, PNJ said there have been many positive changes since October. To take advantage, the firm is offering sales promotions as the market enters the peak year-end shopping period.

In the first 10 months of the year, PNJ's net revenue reached VND26.38 trillion ($1.08 billion), down 7.5% year-on-year, while its after-tax profit hit VND1.53 trillion ($63 million), up 3.1%. The company had completed 74% and 79.1% of its year revenue and profit targets, respectively.

Retail giant Mobile World Investment Corp. (HoSE: MWG) recorded October revenue of VND11.19 trillion ($460.7 million), the highest this year beginning and marking the first month of positive growth compared to the same period last year.

Of this, revenue from non-essential product chains The Gioi Di Dong (mobile phones) and Dien May Xanh (electric and electronic home appliances) hit VND7.8 trillion, up 8% from September but down 5% year-on-year. Grocery chain Bach Hoa Xanh earned more than VND3 trillion ($123.5 million) in revenue, up 6% from September and 29% over the same period last year.

Maybank Investment Bank projected the bright prospects for non-essential goods retailers such as MWG, PNJ, FPT Retail (FRT), Digiwold Corp. (DGW) and PET (Petrovietnam General Services JSC) on expectations that business results will improve after bottoming out in Q2 and Q3.

Financial statements showed that most retail businesses recorded a sharp year-on-year decrease in Q3 results but an improvement against Q2.

For Q4, analysts forecast that retailers’ profits will be better than Q3. Broker Saigon Securities (SSI) predicted that MWG's profit could reach VND334 billion ($13.75 million) in Q4, a sudden high compared to the first three quarters but still down 46% year-on-year.

Asia Commercial Bank Securities (ACBS) forecast that FPT Retail will gain a profit of VND72 billion ($2.96 million) in Q4, reducing its loss for the whole year to VND173 billion ($7.12 million). In 2024, the company is expected to turn loss into profit as its Long Chau pharmacy chain will continue to grow and FPTShop (mobile devices) will not incur losses.

Digiworld forecast its Q4 revenue to increase 15% against Q3 to VND6.2 trillion ($255.25 million) and after-tax profit to surge 37% to VND140 billion ($5.76 million), the highest levels of the year.