During a recent earnings call, an investor inquired about the profitability of the fresh food and FMCG retail chain Bach Hoa Xanh. Vu Dang Linh, CEO of Mobile World Investment Corporation (MWG), stated that the chain's second-quarter after-tax profit reached approximately 182 billion VND. For the first 6 months of the year, Bach Hoa Xanh's profit was around 205 billion VND.

These results represent a significant improvement compared to the loss of over 98 billion VND during the same period in 2024. This is the 4th consecutive quarter the retail chain has reported positive profits.

With a positive outlook for the rest of the year, management is confident that the fresh food and FMCG retail chain can achieve an after-tax profit of over 600 billion VND for the full year. This figure surpasses the initial minimum target of 500 billion VND by 20%.

Elaborating on the upcoming strategy, Nguyen Duc Tai, Chairman of MWG, outlined three main focuses for Bach Hoa Xanh. First, revenue growth will be pursued through accelerated expansion and quality improvement of existing stores. Second, the chain will focus on enhancing product quality and safety, particularly for fresh food. Finally, optimization efforts will target improved profitability in store operations and logistics (currently below 3%), and strengthening relationships with suppliers.

In the first 6 months of the year, Bach Hoa Xanh's total revenue reached approximately 22,600 billion VND, contributing nearly 31% of MWG's total revenue, a 16% increase year-over-year. Compared to the full-year plan, this represents about 47% completion. In May and June, revenues reached approximately 3,900 billion VND and 3,700 billion VND, respectively, showing a plateau compared to the approximately 4,000 billion VND achieved in the earlier months of the year.

During the meeting, investors also raised concerns about the recent stagnation in Bach Hoa Xanh's revenue. Management explained that the rainy season had an impact, but the chain implemented measures to improve waste reduction, which significantly improved profitability. In July, revenue growth rebounded, with Bach Hoa Xanh achieving nearly 3,900 billion VND, a 6% increase year-over-year and a 4% increase compared to June.

Along with the prospect of revenue recovery, the chain also focused on improving operational efficiency. In Quarter II, particularly in May and June, the company proactively controlled costs and reduced waste. As a result, both gross profit and operating profit improved significantly. Despite the monthly decline in revenue, overall gross profit in Quarter II still increased by 15%, and after-tax profit was 8 times higher than in Quarter I.

By the end of June, the company operated 2,184 stores, reaching a record scale, surpassing even April 2022 - the peak of the previous expansion phase. Since the beginning of the year, they have added 414 stores, with over 50% located in central Vietnam, exceeding the initial target of 400 new stores. New stores opened since the start of the year have all recorded positive total operating profit, with over 60% achieving positive EBIT at the store level.

The investment cost for each Bach Hoa Xanh store, especially in central Vietnam, has been significantly reduced compared to before, due to the company's restructuring of its model and focus on quality and adherence to key business indicators. Management acknowledged their previous ambitious approach of introducing various store formats, including large 2-3 story shopping models with high investment costs and an emphasis on expansion quantity. After restructuring, they realized this was not the optimal approach and shifted their focus to quality.

The chain plans to open an additional 200 stores by the end of the year. If successful, they will have opened a total of 620 new stores this year. Management stated that starting next year, Bach Hoa Xanh has the potential to open an average of around 1,000 stores annually and will initially target the northern Vietnam market. With this plan, the estimated CAPEX is around 1,500-2,000 billion VND, reaching 2,500 billion VND including vehicles and warehouses.

"We are confident that we have found the model to expand nationwide. Bach Hoa Xanh has entered a new phase of expansion and is achieving positive results," Nguyen Duc Tai emphasized.

Bach Hoa Xanh staff processing a customer's payment. Photo: MWG

Bach Hoa Xanh staff processing a customer's payment. Photo: MWG

Therefore, next year, MWG's fresh food and FMCG retail chain will expand into the north - a market currently dominated by the WinMart and WinMart+ chains of Masan Group (MSN).

In a recent report, Vietcap Securities noted the accelerating race for market share in modern grocery retail between the two leading companies. This is happening as both have identified profitable business models for new stores, and stricter tax compliance regulations are being applied to traditional channels.

Tat Dat