Retail stocks such as MWG, FRT and DGW have recently seen their prices pick up sharply on the bourse.

Expectations of recovery In the first six months of 2023, the total retail sales of consumer goods and services were estimated at over VND3,016 trillion, up an impressive 11% compared to the same period last year, according to data from the Ministry of Industry and Trade. The revival of consumer demand in the domestic market is expected to continue in the second half of the year as macroeconomic policies have started to take effect. Notably, on July 1, the base salary for civil servants, public employees, and the armed forces were increased by 20% from VND1.49 million to VND1.8 million per month. The National Assembly approved a reduction in the value-added tax on certain groups of consumer goods from 10% to 8% on the same day. These measures are anticipated to stimulate demand in the economy, directly impacting the expected sales of retailers in the coming months. Furthermore, the decline in inflation and interest rates is good for the economy as a whole and the retail sector. Moreover, a projected recovery in exports in the fourth quarter is likely to boost consumption in late 2023 and early 2024. Retailers are expected to experience an improvement in profit margins in the second half of 2023 as price competition becomes less intense and interest expenses decrease. The first half of the year saw price competition and high inflationary pressures, which squeezed their profit margins. This was particularly evident in the case of Apple's iPhones, as retailers came under pressure to manage their unsold stock before launching the new model into the market (expected in October). For instance, FPT Shop (known as FRT on the stock exchange), which heavily relies on Apple products, had tough business in the first six months of 2023 due to modest profit margins and the burden of dealing with unsold inventory. However, once the volume of unsold products is likely handled before the next iPhone launch (probably in September), FPT Shop's financial performance is expected to recover more swiftly than other players in the industry. The long-term prospects of retailers hinge on their shift from traditional to modern commerce and their plans for capital hikes within the business community. The penetration of modern commerce in the ICT & CE sector (information and communication technology & consumer electronics) is currently high, accounting for around 70-75% of the total market demand. In contrast, the rate for grocery and drug stores remains low (only 14% and 5% of the total demand, respectively). Similarly, the penetration rate for branded jewelry stands at approximately 60% of the total demand. Those investors looking forward to prospects over the next two or three years may prefer stocks like MWG and FRT, as these companies operate their own chains of grocery stores and pharmacies. Regarding capital mobilization, companies may seek external financing to expand their retail outlets. With the pharmacy chain Long Chau already profitable, FRT is likely to increase its capital in the near future to expand its network to 3,000 stores (up from 1,234 stores as of May 2023). Similarly, Mobile World (MWG) may raise additional capital to scale up Bach Hoa Xanh as this retail chain approaches the breakeven point. Stock price acceleration Retail stocks, including MWG, FRT and DGW, have recently enjoyed significant price surges on the stock exchange. An example of this trend can be seen in DGW, which closed at VND49,000 per share on July 17, a remarkable 21% increase in just over a week of trading. This retail stock has reached its highest price in the past nine months. Compared to its market price in late March this year, DGW has made an impressive breakthrough of around 70%, with its market capitalization growing by nearly VND3.4 trillion to over VND8.18 trillion. This surge is in response to expectations that the company's business results have already reached their lowest point in the first quarter and are set to gradually recover. In an online meeting between SSI Securities Corporation and DGW in late June, the retailer projected its net sales and net income in the second quarter of 2023 to be around VND4.1 trillion and VND82 billion, respectively, a year-on-year increase of 16% and 40%. DGW's leadership believes that revenue in the second half of the year will improve, thanks to the launch of Apple's iPhone 15 in October and higher laptop sales during the upcoming back-to-school season. Similarly, MWG has posted consistent growth, with its share price reaching around VND48,000, the highest level in over five months since the beginning of February. Additionally, the company's market capitalization has quickly expanded by VND8.9 trillion, totaling some VND71.9 trillion. MWG has reported a rapid growth rate of more than 25% since the beginning of June. Notably, MWG struggled at the bottom for a few months before showing signs of recovery in late May. Positive results have been observed since the restructuring of Bach Hoa Xanh. The revenue brought in by the retail chains of The Gioi Di Dong and Dien May Xanh in May edged up by 4% against April, mainly driven by growth in air conditioner sales. Overall, it will take more time for MWG to prove the effectiveness of its new business strategy and its ability to bring Bach Hoa Xanh to the breakeven point in 2024.