Mobile World's price war hits electronic retailers' profits

Mobile World Group (MWG), as its name translates into, has taken on other major retailers such as FPT Shop of FPT Retail (FRT), Di Dong Viet, CellphoneS, and Viettel Store by offering competitive prices, especially for the iPhone.

Its revenues have increased steadily since, reaching VND30.3 trillion (US$1.26 billion) in the third quarter, up 11% and 3% from the first and second quarters.

Its inventories decreased sharply to VND22.8 trillion as of the end of September, 20% down for a year earlier.

Its large network with thousands of sales points across the country and price cut strategy have helped MWG attract more customers.

At a recent analysts meeting, the company’s management said the market share by value of its two chains, Mobile World and Dien May Xanh, rose by 5 percentage points during the second quarter.

Its market share of iPhones surged to 45% at the end of June from 25-30% during the first quarter.

But with its many promotions and lower profit margin strategy meant profits declined.

Its gross profit margin was 18.7% in the third quarter, a slight increase from the previous quarter but much lower than the 25.9% in 2022.

After-tax profit for third quarter was VND39 billion, a year-on-year fall of 96%.

In the profit structure, financial revenue became an important contributing factor when MWG has abundant cash.

If financial activities were subtracted, MWG racked up losses of VND40, VND171 and VND135 billion in the last three quarters.

In the final quarter of last year MWG’s non-financial after-tax profits were nearly VND1 trillion.

They declined in the first quarter of this year but were still worth VND700 billion.

MWG’s sales network, including TopZone and Dien May Xanh chains, shrank from 3,480 stores in April to 3,451 at the end of September.

TopZone, which sells only Apple products, closed a store for the first time in September after a long period of expansion.

In a report in October, ACB Securities Company said the consolidated gross profit margin of MWG’s Mobile World and Dien May Xanh chains would be 16.9% this year, down from 18.2% in its previous forecast.

Vietcombank Securities Company revised down its forecast of MWG’s after-tax profits this year on mobile phones and electronic products from 3.5% to 2.5%.

The price war is eroding the profits of all retailers, but MWG has not indicated when it will stop.

Its management has merely said it will adjust the price strategy at the end of this year.

FRT believes the fierce competition will cool down once major players see their inventories shrink.

According to Bao Viet Securities Company, the price pressure could ease when demand surges during the peak year-end shopping season.