"Feel the pain" of the price war
FPT Digital Retail Joint Stock Company (FPT Retail, code FRT) has just announced its financial report for the second quarter and the first 6 months of 2023. The first half revenue of the FPT Shop chain (specializing in retailing mobile digital products such as mobile phones, tablets, laptops, ...) reached 8,118 billion, down 19% over the same period.
FPT Retail has FPT as a major shareholder holding more than 46%.
The difficulties of the information and communication technology (ICT) retail market along with the price war of products in this field caused FPT Retail to lose 198 billion VND in the first 6 months of the year.
In the second quarter alone, FPT Retail lost VND251 billion (compared to a profit of VND47 billion in the same period) due to an 18.1% decrease in revenue.
According to FPT Retail, the reason is that demand for goods continues to decrease as consumers tighten spending, especially on high-value items, income decreases, unemployment increases...
In addition, competition in the electronics retail industry continues to be fierce as retailers cut prices to gain market share.
The decline in consumer demand caused FPT Retail to reduce its workforce by more than 5,000 employees compared to the beginning of the year, down to 10,459 people.
However, Long Chau pharmacy chain continued to record strong revenue growth, with a cumulative 6-month increase of 72% over the same period to nearly VND 6,900 billion thanks to a strong network expansion and drug consumption demand less affected by economic instability.
In the pharmaceutical sector, FPT Long Chau opened 306 new pharmacies in 6 months, increasing the number of pharmacies with revenue to 1,243. Average revenue reached more than 1 billion VND/store/month.
With similar difficulties in the sales of non-essential goods, in the first half of 2023, Mobile World Investment Corporation (MWG), chaired by Mr. Nguyen Duc Tai, recorded a 20% decrease in net revenue compared to the same period, down to VND 56,570 billion, and only completed 42% of this year's revenue target.
Revenue of the Mobile World and Topzone chains (selling phones and laptops) decreased sharply, estimated at VND13,351 billion (23.6%), but in return, Dien May Xanh reached VND28,228 billion (49.9%) thanks to air conditioner sales during the hot season. Meanwhile, revenue of the Bach Hoa Xanh chain (selling vegetables and fish) increased by 7% over the same period to VND13,600 billion.
Thus, this is the second consecutive month in 2023 that revenue from selling meat, fish, vegetables... is higher than selling phones, computers...
For PNJ of Phu Nhuan Jewelry Joint Stock Company of Ms. Cao Thi Ngoc Dung, retail jewelry revenue in the first 6 months of 2023 decreased by 10.3% compared to the same period in 2022, down to VND 16,459 billion due to adverse impacts from the market.
According to PNJ, the decrease in revenue was due to a decrease in domestic jewelry purchasing power and orders from corporate customers. Wholesale jewelry revenue in the first 6 months of the year decreased by 30.2% compared to the same period in 2022.
More positive expectations for the end of 2023
Despite difficulties in the first half of 2023, according to ACB Securities (ACBS), Vietnam is still considered a potential retail market in the world. Although traditional trade channels are still dominant, modern retail channels are increasingly developing with many chains such as fast-moving consumer goods (FMCG), pharmaceuticals, mobile phones, home electronics, etc. expanding rapidly.
Retail sales of goods and services reached nearly VND5.7 million billion in 2022. Consumer purchasing power decreased in the first half of 2023 due to unfavorable economic situation, rising interest rates, more difficulties in accessing consumer financial services, concerns about income/employment stability, etc.
During this time, consumers focus on essential products, rather than less essential items such as household appliances, clothing, etc.
In the second half of the year, ACBS believes that the retail industry will improve with a better economic forecast. Spending will improve thanks to lower interest rates and reduced VAT...
Overall, in the long term, a growing economy, political stability, a large and connected population, urbanization, rising incomes and higher living standards are favorable factors supporting the growth of Vietnam's retail market.
According to ACBS, the recovery of international tourists will likely contribute to the growth of the retail industry. Although the aging population is getting closer, at present, Vietnam still has a young population model and this advantage can be maintained for about 10 more years according to the forecast of the United Nations Population Fund (UNFPA).
Vietnam’s middle class is expected to continue to expand, driven by economic growth and urbanization. According to a Knight Frank report, the number of high net worth individuals (over $1 million) in Vietnam increased by 70.8% between 2017 and 2022; and is forecast to increase by 60.4% between 2022 and 2027.
SSI Research expects that the decrease in interest rates will help reduce the pressure on consumers to pay interest as well as the pressure on interest costs for retail businesses.
Regarding MWG, SSI Research believes that revenue from the mobile phone and electronics (ICT & CE) segment may continue to decline in the second and third quarters, then gradually increase from the fourth quarter of 2023 to the end of 2024 due to less fierce price competition and lower inventory levels. MWG is expected to benefit significantly from the recovery in disbursement activities of consumer finance companies.
Dragon Capital Securities (VDSC) also forecasts that consumer demand for ICT products will improve by 9% in the second half of 2023.
Meanwhile, Bach Hoa Xanh's food segment may find it difficult to make a profit in 2023 as planned by MWG.
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