Hanoi (VNS/VNA) - Retail stocks have dropped significantly due to thedecline in business results in the context of the global economic recession andhigh interest rates.

Mobile World (MWG) and Digiworld (DGW) are both hovering around the long-termbottom with a drop of more than 50% from the peak. Petrosetco (PET) has beenalmost flat since the beginning of February while Petrosetco Distribution JSC(PSD) is finding the bottom. This duo has dropped by 60-65% of the market pricecompared to their peak.

The Phu Nhuan Jewelry Group (PNJ) and FPT Retail (FRT) have been strugglingsince the end of January. These two stocks have fallen by 16% and 38%respectively from the peak.

The recent plunge in retail stocks partly came from the decline in businessresults. The difficult global economy and high interest rates have led toslowing consumer demand, especially on non-essential items such as electronicsand phones.

For Mobile World (MWG), Q4 profit after tax dropped sharply by 60.4%year-on-year to 619 billion VND, a multi-year low. For the whole of 2022, thisretail business's net profit decreased by 16% to 4 trillion VND.

Digiworld (DGW) also recorded a sharp drop in business results in the fourthquarter of 2022 with net revenue of 4.07 trillion VND and post-tax profit of 155.5billion VND, down 48% and 52% respectively compared to the same period lastyear. According to their explanation, after the boom in demand for working fromhome, the demand for the laptop and tablet segment began to decline. Post-taxprofit for the whole of 2022 reached 684 billion VND, only a slight increase of5% over the same period.

Petrosetco (PET), the authorised distributor of all genuine Apple product linesin Vietnam, in January 2023, revenue was estimated at 1.21 trillion VND andpre-tax profit at 2 billion VND, down 26% and 94%, respectively. The reasoncomes from the discontinuity of distribution activities due to the prolongedLunar New Year holiday.

Petrosetco's subsidiary, Petroleum General Distribution Services (PSD), alsoreported a decrease in profit in the fourth quarter of 2022, down 74% to reach 13.4billion VND. The reason was due to the decrease in revenue and the increase inloan interest rates at banks. For the whole of 2022, PSD's net profit wasnearly 113 billion VND, down 19% year-on-year.

FPT Retail (FRT) also recorded a slight decrease in revenue in the fourthquarter of 2022 to 8.49 trillion VND. Net profit was only 97 billion VND, down71%. Profit for the whole year 2022 reached 398 billion VND, down from 2021 andonly fulfilled 67.5% of the set target.

According to the explanation, in the fourth quarter of 2022, the company facedmany disadvantages from the supply chain disruption during the launch of Apple'snew products, and the purchasing power of ICT products decreased sharply due tothe influence of the weak market. Financial costs continued to increase due torising interest rates.

The Phu Nhuan Jewelry (PNJ) still recorded growth in the fourth quarter of 2022and the first two months of this year. In the first two months, PNJ's netrevenue reached 7.07 trillion VND and profit after tax of 522 billion VND, up41% and 37% respectively year-on-year. In the previous 4th quarter, PNJachieved 7.09 trillion VND in net revenue, up 21% and net profit of 457 billionVND, up 7% year-on-year.

Pressure in the short term

Retail is considered a promising field in 2023 as consumption will recoverstrongly after COVID-19 lasting from 2020-21, said Viet Dragon Securities Co.

However, economic slowdown and tight monetary policy, shrinking householdbudgets could put pressure on consumer demand. Furthermore, the wave of jobcuts in labour-intensive industries will continue until at least the secondquarter of 2023.

VDSC said the change in consumer behaviour will put a heterogeneous impact oneach Vietnamese retailer. Essential items (FMCG, pharmaceuticals) and expensivenon-essential items will still be sold well. Meanwhile, non-essential productsin the mid-end segment, especially technology devices, may experience theheaviest decline in consumption in 2023.

SSI Research also said that consumption of non-essential products will remaindismal, at least until the first half of 2023.

In the first half of 2023, it is expected that electricity prices, medical andschool expenses fees will increase. In addition, value added tax has alsoincreased to 10% from January 1, 2023. These factors will be affecting thepurchasing power of consumers. Business activities of retail enterprises alsoface many challenges./.