More consumer electronics - FRT

On a tip from a reader, I started to look at FRT, which is a comp to MWG. Both have consumer electronics businesses and both have invested in pharmacies. But that’s about the end of the comparisons.

Revenues: if you remember, MWG had amazing revenue growth. From VND25.3tr in 2016 to VND102.2tr in 2019. That’s 4x!. FRT grew from VND10.8tr to VND16.6tr in the same period.

Margins: MWG gross margin has been at least 300bps higher than FRT, and it grew to 19.1% in 2019 compared to 12.7% at FRT. Operating margin was almost 5% at MWG in 2019 but just 1.6% at FRT.

Profits: Because of a falling margin at FRT, net income has barely moved from 2015 to 2019. That’s not the case at MWG.

Remember that during this time, MWG has been investing considerably in new stores. FRT has also invested in new stores, but not at the same pace, yet the slower pace hasn’t seemed to help profits, which would be one reason to do it.

Also, MWG added in grocery, which is not a high-margin business (having worked personally in a small grocery, I can tell you that it is a tough business).

So what’s really driving it? Well, it was partially pharmacy, which was only 3% of total sales in 2019, but it lost VND42bn (PBT) or 15% of the profit of the consumer electronic stores. But even the consumer electronics profit margin before tax of 2.0%, which isn’t great.

I am going to write more about this tomorrow, but I have to run now.

VietEcon

More consumer electronics - FRT

VietEcon