Hanoi (VNS/VNA) - Poor business performance is affecting retail stockson the market, but the industry is showing signals of recovery, said experts.

The market's benchmark VN-Index had gained 11.2% in the first half of 2023,while retail stocks decreased by 1.3%, according to SSI Research. Decliningprofits in the first half of the year were attributed to the less positiveprices of the stocks.

Since the last quarter of 2022, the profits of retail businesses have decreasedsignificantly due to many difficulties in the economy. The sluggish exportorders forced businesses to lay off workers while soaring inflation has weighedon consumers' disposable incomes making them cut non-essential spending.

However, SSI Research experts say that the profits of most retail businessesmay have hit bottom in the first half of 2023 and retail businesses started torecover.

“We expect profits of the industry to be positive from the fourth quarter of2023 to 2024. The recovery is likely to be driven by the disbursement ofconsumer loans, the improvement of macro-economic conditions, expansion inmarket shares of companies with strong finance and the improvement in profitmargins thanks to lower inventories,” said SSI Research.

In the first six months of the year, sales and revenues of the retail sectorgrew, but at a lower rate than a year ago. This showed that consumers' buyingforce has not improved much, affecting business results of retail companies, LeXuan, an independent trader, told Viet Nam News.

"But I think given the rebound of the domestic and internationaleconomies, the industry's results will bounce back in the second half,"Xuan said.

She also noted that as retailers will accelerate sales promotion programmessuch as Back to School, Halloween, and Black Friday, as well as theintroduction of Samsung and Apple flagship stores, revenues are expected toincrease strongly over the first half of the year.

SSI believes that the long-term prospects of retail companies depend on thetransition from traditional to modern commerce and capital-raising plans.

The application of modern trade in the information technology and homeelectronics industries is currently high, accounting for about 70-75% of thetotal market, while that of department stores and pharmaceuticals are stillvery small, according to SSI.

SSI Research said that companies can seek outside capital to finance storeexpansion.

The Long Chau pharmacy chain of FPT Digital Retail JSC (FRT) is now profitableand may have to raise capital in the near future to expand its store network to3,000 stores.

Mobile World Investment Corporation (MWG) will also raise its capital to expandthe scale of Bach Hoa Xanh (Green Grocery) once the chain approaches thebreak-even point.

Moreover, interest rates are expected to continue lowering in the second halfof 2023, helping to ease the pressure on consumers to pay interest on homeloans. At the same time, a recovery in exports (expected in the fourth quarter)will help boost consumption towards the end of the year.

VNDiret Securities Corporation expects new orders from major export markets torise from the second half of 2023, easing concerns and gradually stabilisingfirms' revenues and helping Vietnam enter a new consumption cycle.

The securities firm added that the VAT reduction from 10 to 8% for manyessential items such as dry food, beverages, and household goods has a dualbenefit, as consumers can buy cheap goods while businesses' revenue grows.

On the stock market, investor attention shifted to the retail sector last weekafter the 2 percentage point VAT reduction policy officially took effect fromJuly 1. Particularly, MWG shares and Digiworld Corporation (DGW) both climbedby 8.7%, while Phú Nhuận Jewelry (PNJ) jumped by 9.3%./.