MWG May Update — VietEcon

I am back! Hope you didn’t miss me too much. I am going to have to ease myself into this, because I am pretty busy in trying to get a big move done during COVID. What a mess the world is, except in Vietnam.

But I wanted to check in on my beloved MWG, which posted a May update. There are a lot of things we can gain from this report. Things that apply to MWG but also that apply to Vietnam as a whole.

Revenues were up 19% yoy in May to VND10.3tr. That’s great. And most of the sales (62%) came from the more profitable Dien May Xahn (DMX), rather than the grocery.
BHX, the grocery, continues to outperform tremendously. Revenues there were more than VND2tr, up 155% yoy. For the year, they are up 167%. The number of stores also grew by 334 net new stores, while both other brands (DMX and TGDD) closed stores.
Net profit was up slightly (+4% yoy). As long as BHX is driving a lot of the growth, it will be hard for net profit to rise as much, just because margins are so much lower at BHX. We have talked about this a bunch, but generally grocery margins are only 2-5% at very mature stores. BHX is still growing.
The company said that gross margin at BHX improved due to a better negotiating postiion over suppliers and better inventory control (making sure that waste is minimal, always hard to do with a grocery). These should both improve over time. MWG said EBITDA at BHX in May.
One more small thing: online revenue was down 1%. yoy in May If you remember this post, my view was/is that online ordering/delivery would probably revert back once the lockdowns were completed but that data mining is the key. Well, it turns out I was right, at least for MWG - online ordering reverted back, but the company likely has a lot more data to mine. Hopefully it can make use of ti.

Now what does this all mean for Vietnam. Well, it is some evidence for a V-shaped recovery.

We will have to see what happens in June, but we could very likely see a return to more normal growth, with certain segments doing much better than others. Phones didn’t do that well, but white goods did. And groceries continue to be very strong.

Of course, while Vietnam has escaped mostly unscathed by COVID directly, we are going to start seeing the indirect effects over the next few months as exports fall and external demand remains minimal. That could result in the V turning into a W. Let’s hope not. But looking at the US (the consumer of the world), I am pessimistic.