Retail and consumer industry set for strong recovery in 2024

A pharmacy of the Long Châu pharmacy chain under FPT Retail. In the pharmaceutical segment, Long Châu pharmacy chain surpassed its new store opening plan for 2023 by opening 447 new pharmacies in the first nine months of the year. Photo Long Châu pharmacy

HÀ NỘI – The retail and consumer industry is poised for a strong recovery in 2024, driven by positive business conditions and encouraging macroeconomic indicators, according to leading securities companies.

In their outlook report for the year, these firms assert that the worst challenges faced by the retail industry are now in the past. Additionally, the anticipated surge in end-of-year spending by consumers is expected to fuel positive growth in the retail sector.

Consumer activities and shopping are back in full swing, as indicated by the latest data from the Ministry of Industry and Trade. December 2023 witnessed vibrant service trade activities, driven by preparations for major year-end holidays and the arrival of the new year in 2024.

Consumer demand remained robust, maintaining an upward trend compared to the same period the previous year. Consequently, total retail sales of goods and consumer service revenue for December 2023 are estimated to reach VNĐ565.8 billion, reflecting a 2.6 per cent increase from the previous month and a significant 9.3 per cent increase from the same period in 2022.

For the entire year of 2023, total retail sales of consumer goods and services at current prices were projected to reach VNĐ6.23 trillion, marking a 9.6 per cent increase over the previous year. Retail sales of goods alone were estimated at VNĐ4.85 trillion, accounting for 78 per cent of the total and showing an 8.6 per cent increase over the previous year.

In their latest report, KB Securities Việt Nam (KBSV) has assessed the prospects of the retail industry in 2024, affirming that clearer signs of recovery are emerging alongside improved macroeconomic indicators. KBSV highlights the positive rebound in exports, which have returned to positive growth after several months of decline. This recovery bodes well for job creation and income growth.

Inflation has shown signs of subsiding since the beginning of last year, with a decrease from its peak of 4.9 per cent to the current range of 3.4-3.6 per cent. KBSV believes that these positive developments will strengthen demand in the economy.

Similarly, the analysis group at VNDirect Securities believes that the challenging period for the consumer industry during the first half of 2023 has passed, and the sector is now entering a recovery phase with multiple positive indicators.

Having bottomed out from a period of weak consumption, VNDirect anticipates that electronic, consumer distribution and retail companies will experience robust net profit growth starting from the fourth quarter of 2023 on favourable growth expectations.

The overall health of enterprises is gradually improving. FPT Digital Retail Joint Stock Company (FPT Retail or FRT) recently reported that the launch of the iPhone 15 series in October 2023 generated significant interest in the ICT segment.

FPT Shop received over 10,000 deposits for the purchase of the iPhone 15 series since the end of September 2023. The revenue from sales of this product will be reflected in the fourth quarter of 2023, contributing to an improved business outlook for the company.

In the pharmaceutical segment, the Long Châu pharmacy chain under FPT Retail surpassed its new store opening plan for 2023 by opening 447 new pharmacies in the first nine months of the year. The average monthly revenue per pharmacy at Long Châu currently stands at nearly VNĐ1.1 billion, and the cumulative revenue from the Long Châu Pharmacy chain has increased by 69 per cent compared to the same period last year, reaching VNĐ12 billion.

Looking ahead, SSI Research expects the revenue of the Long Châu pharmacy chain to increase by 22 per cent in 2024 compared to the previous year, which is lower than the impressive 71 per cent growth witnessed in 2023.

This slower growth is attributed to the chain no longer expanding from a low comparative base. Furthermore, as Long Châu grows its network into rural areas, the revenue per store may not reach the same levels as urban stores, explaining the relatively weaker growth.

Despite this, Long Châu has seen improved profitability primarily due to its larger scale, which enables more efficient direct sourcing and utilisation of warehouse and logistics facilities.

According to Masan Group’s latest financial report, their net revenue in the first nine months of 2023 reached VNĐ57.46 trillion, showing a 3.5 per cent increase compared to the same period the previous year. Their profit after tax amounted to VNĐ1.35 trillion.

In the jewellery industry, Phú Nhuận Jewelry Joint Stock Company (PNJ) managed to achieve relatively positive business results despite a less favourable business context. In the third quarter of 2023, PNJ experienced a 6-per cent decrease in net revenue, reaching VNĐ6.91 trillion. However, their profit after tax increased by 0.4 per cent compared to the same period in 2022, amounting to VNĐ253.3 billion.

In the first nine months of 2023, PNJ earned VNĐ23.37 trillion in net revenue and VNĐ1.33 trillion in profit after tax, maintaining a similar level compared to the same period the previous year. This puts the company on track to meet 66 per cent of its revenue plan and 69 per cent of its profit target for the year.

Attractive retail stocks

In terms of attractive retail stocks, several securities companies have identified potential industry groups and provided outlook reports. SSI Research suggests that Phú Nhuận Jewelry (PNJ) and FPT Retail (FRT) stocks have positive prospects in 2024.

Despite declining jewellery demand in the second half of 2023, PNJ’s retail sales showed signs of recovery in October and November 2023, with a 5-per cent increase compared to the same period. PNJ still has opportunities to gain market share from unbranded jewellery since branded jewellery accounts for about 40-50 per cent of total demand.

Regarding FPT Retail, SSI Research believes that the Long Châu pharmacy chain has a competitive advantage in the pharmaceutical retail sector due to its diverse range of drug products. The chain’s large scale also facilitates direct sourcing and a significant proportion of prescription drugs, enabling it to gain market share in the hospital channel.

In the phone and electronics segment, SSI Research expects FPT Shop to recover in 2024 after being affected by weak demand and inventory clearance activities in 2023.

KB Securities Việt Nam (KBSV) has a positive evaluation of MSN shares as Masan Group is considered a pillar corporation in the retail and consumer industry. Subsidiaries such as Wincommerce, Masan Consumer, and Masan MEATLife have achieved positive results. Wincommerce continues to experience revenue growth, with many stores reaching profits and approaching break-even for the entire chain.

KBSV also recommends that investors consider Mobile World Group (MWG) shares. The Bách Hoá Xanh chain, part of Mobile World Group, has shown positive signs, with chain-wide and store revenues improving consistently. VNS