Retail companies expect weaker earnings growth

VIETNAM, July 20 – A corner of PC products in an FPT store. FPT Retail (FRT) earnings also peaked in the fourth quarter of 2021 on unusually strong laptop sales, but in the fourth quarter earnings may decline. — Photo courtesy of FPT Shop

HÀ NỘI — Rising inflation will negatively impact consumer spending, and retail corporate earnings growth may not be as strong as expected, SSI Securities Inc.

In the information technology and home electronics (ICT and CE) segments, Digiworld (DGW) reported a 20% increase in net profit in the second quarter of this year, well below the increase in 97% in the first trimester.

Mobile World Group (MWG) reported a 2% increase in revenue from the ICT and CE segments in May, well below the 20-22% increase from February to April.

Digiworld (DGW) earnings growth peaked in the fourth quarter of 2021 on unusually strong laptop sales, but fourth quarter earnings growth is expected to be negative. In 2023, DGW’s profit may increase further due to increased contributions from newly signed contracts, such as Whirlpool and Joyoung brand home appliance distribution contracts. Revenue from existing contracts may continue to increase as Xiaomi mobile phones continue to enter the market and iPhone sales prices continue to rise each year.

FPT Retail (FRT) earnings also peaked in the fourth quarter of 2021 on unusually strong laptop sales, but in the fourth quarter earnings may decline. FRT’s profit may increase further in 2022, albeit very little, thanks to an increased market share in the retail ICT industry and the pharmacy chain. With its experience in pharmaceutical retail, FRT’s Long Châu pharmacy brand will continue to gain market share from retail pharmacies.

Mobile World Group (MWG) will also see its profits increase thanks to the increase in its market share in the ICT and CE segments, although the growth will be relatively weak. MWG’s earnings growth in 2023 hinges on the successful restructuring of its Bách Hoá Xanh (BHX) retail chain in the second and third quarters of this year. If the restructuring is successful, future earnings growth could catch up to pre-pandemic growth by 30-40%, similar to the 2017-2019 period.

According to SSI Research, revenue growth in the second half of the year for the ICT & CE segment will be higher than the growth in the first six months. For companies with a high share of laptop sales in total revenue, such as FPT Retail and Digiworld, revenue growth is expected to be single-digit in the second half of 2021 due to the shortage issue. of chips.

In 2023, SSI Research forecast flat revenue for the ICT segment and single-digit growth for the CE segment. Large companies will gain more market share through strong bargaining power with suppliers, enabling them to mitigate the impact of rising costs and thus offer more discounts to support customers amid pressures inflationary.

In the jewelry segment, although the challenging inflationary environment may negatively affect demand for gold jewelry in the last six months of 2022, revenue growth for jewelry businesses is still benefiting from the post-COVID-19 recovery .

In 2023, a large-scale economic downturn will put pressure on the demand for gold, but the impact and persistence of inflation in Việt Nam will be the decisive factors for the consumption of high-income people on non-essential goods. such as jewelry, according to SSI Research. Therefore, demand in 2023 is unlikely to exceed pre-COVID-19 levels.

Inflation and recession will negatively affect spending on non-essential items. Low-income people are the first to be affected, while spending on non-essential items by high-income people remains stable. However, if inflation and recession persist, spending by high-income earners will also suffer.

According to SSI Research, Phú Nhuận Jewelry (PNJ) may achieve the highest profit growth in Q3 2022. It posted a loss in Q3 2021 as it had to close many stores due to strict social distancing measures. —VNS