Retail stocks on track to rebound
Retail stocks on track to rebound
Poor business performance is affecting retail stocks on the market, but the industry is showing signals of recovery, said experts.
Consumers shopping at a store of Mobile World Investment Corporation. — VNS Photo Mai Hương |
The market's benchmark VN-Index had gained 11.2 per cent in the first half of 2023, while retail stocks decreased by 1.3 per cent, according to SSI Research. Declining profits in the first half of the year were attributed to the less positive prices of the stocks.
Since the last quarter of 2022, the profits of retail businesses have decreased significantly due to many difficulties in the economy. The sluggish export orders forced businesses to lay off workers while soaring inflation has weighed on consumers' disposable incomes making them cut non-essential spending.
However, SSI Research experts say that the profits of most retail businesses may have hit bottom in the first half of 2023 and retail businesses started to recover.
“We expect profits of the industry to be positive from the fourth quarter of 2023 to 2024. The recovery is likely to be driven by the disbursement of consumer loans, the improvement of macro-economic conditions, expansion in market shares of companies with strong finance and the improvement in profit margins thanks to lower inventories,” said SSI Research.
In the first six months of the year, sales and revenues of the retail sector grew, but at a lower rate than a year ago. This showed that consumers' buying force has not improved much, affecting business results of retail companies, Lê Xuân, an independent trader, told Việt Nam News.
"But I think given the rebound of the domestic and international economies, the industry's results will bounce back in the second half," Xuân said.
She also noted that as retailers will accelerate sales promotion programmes such as Back to School, Halloween, and Black Friday, as well as the introduction of Samsung and Apple flagship stores, revenues are expected to increase strongly over the first half of the year.
SSI believes that the long-term prospects of retail companies depend on the transition from traditional to modern commerce and capital-raising plans.
The application of modern trade in the information technology and home electronics industries is currently high, accounting for about 70-75 per cent of the total market, while that of department stores and pharmaceuticals are still very small, according to SSI.
SSI Research said that companies can seek outside capital to finance store expansion.
The Long Châu pharmacy chain of FPT Digital Retail JSC (FRT) is now profitable and may have to raise capital in the near future to expand its store network to 3,000 stores.
Mobile World Investment Corporation (MWG) will also raise its capital to expand the scale of Bách Hóa Xanh (Green Grocery) once the chain approaches the break-even point.
Moreover, interest rates are expected to continue lowering in the second half of 2023, helping to ease the pressure on consumers to pay interest on home loans. At the same time, a recovery in exports (expected in the fourth quarter) will help boost consumption towards the end of the year.
VNDiret Securities Corporation expects new orders from major export markets to rise from the second half of 2023, easing concerns and gradually stabilising firms' revenues and helping Việt Nam enter a new consumption cycle.
The securities firm added that the VAT reduction from 10 to 8 per cent for many essential items such as dry food, beverages, and household goods has a dual benefit, as consumers can buy cheap goods while businesses' revenue grows.
On the stock market, investor attention shifted to the retail sector last week after the 2 percentage point VAT reduction policy officially took effect from July 1. Particularly, MWG shares and Digiworld Corporation (DGW) both climbed by 8.7 per cent, while Phú Nhuận Jewelry (PNJ) jumped by 9.3 per cent.
