Retail outlook 2026: Further re-rating is expected

Domestic Consumption: Expectations to Strengthen in 2026

Retail sales in the first ten months of 2025 increased by 9.3% in nominal terms and 7.0% year on year in real terms, maintaining the recovery momentum seen since 2024. However, consumption remains below the pre-COVID average growth rate of 11–12%, largely due to still-subdued consumer sentiment.

As of the first eleven months of 2025, total retail sales of goods and consumer services rose 9.1% year on year to VND 6,377.7 trillion, reflecting a steady recovery and stable growth in the domestic market. Essential categories such as food, beverages, and apparel recorded solid growth, alongside positive contributions from tourism and travel services.

MSVN expects consumer sentiment to improve and consumption to strengthen in 2026, supported by: (i) improving macroeconomic conditions, including lower tariff-related risks and accelerating GDP growth, alongside government stimulus measures and policies to boost domestic demand; (ii) better employment conditions and the easing of constraints on household businesses; and (iv) positive wealth effects.

A key development is the adjustment of personal income tax (PIT) regulations aimed at increasing disposable income.

By aggregating these adjustments, MSVN provides a preliminary estimate of their impact on net personal income. The changes are expected to significantly reduce effective PIT burdens, thereby increasing disposable income across all income brackets. Notably, low-income households—particularly those with dependents—may pay minimal or no PIT. Middle-income earners with pre-tax income exceeding VND 40 million per month and one dependent are expected to be the largest beneficiaries, with net income rising by approximately 4%.

At the same time, wealth effects are turning positive, supported by: (i) gains in equity and gold markets; and (ii) a recovery in the real estate sector, marked by improving liquidity and new project launches following legal reforms. Improved household wealth perceptions are expected to support higher discretionary spending, particularly in electronics and jewellery.

Beyond new social policies aimed at strengthening consumer confidence, additional supportive measures are likely as the government pursues its target of 10% annual GDP growth for the 2026–2030 period. Stronger consumption will play a central role in achieving this goal. MSVN anticipates further demand-side support measures, building on existing programs, including accelerated public investment disbursement; targeted support packages for real estate and tourism; an extension of VAT reductions through end-2026 (covering transport, logistics, and ICT-related goods and services); public school tuition exemptions; and PIT reforms to boost disposable income.

Over the next decade, MSVN believes Vietnam’s consumption will enter a robust growth cycle. A positive economic outlook will support rising incomes and an expanding consumer base. Favorable demographics—characterized by a large population and a rapidly growing middle class—will drive domestic consumption and attract additional foreign investment. Vietnam continues to record strong FDI inflows, rapid urbanization, and fast-evolving consumption patterns among its young population. Together, these factors are expected to underpin strong consumption growth and position Vietnam as one of the region’s largest and fastest-growing consumer markets.

Corporate Earnings: Sustained Growth Momentum

Listed retail companies continued to deliver strong profit recovery in Q3 2025, with all major players reporting positive earnings growth. This was supported by improving consumption, expanding modern retail market share, and increasing operating leverage. Sector-wide profit attributable to parent shareholders surged 96% year on year in Q3 2025, following strong growth in the previous two quarters (Q2 2025: 51% YoY; Q1 2025: 53% YoY), exceeding MSVN’s forecast by 39%.

Most companies significantly outperformed expectations in Q3 2025, including MWG (121% YoY), MSN (72% YoY), PNJ (130% YoY), and FRT (55% YoY), while DGW (36% YoY) maintained steady growth.

Although demand recovery remains gradual, profit resilience has been strengthened by continued operational efficiency gains, reflecting restructuring efforts undertaken in 2023–2024 in response to macroeconomic challenges. Market leaders have consolidated their positions, expanded market share, and improved margins. In the first nine months of 2025, sector profits rose 66% year on year, driven mainly by MWG (73% YoY) and MSN’s strong recovery (101% YoY).

Nine-month 2025 results further underscore the sector’s resilience, with all key companies exceeding expectations despite only gradual consumption recovery.

MSVN expects sector-wide earnings to remain strong, supported by continued improvements in consumption driven by stronger economic growth and ongoing domestic demand stimulus measures implemented by the government.

In addition, wealth effects—stemming from the recovery of the real estate market and the strong rally in equities since the beginning of the year—are expected to become more pronounced in the second half of 2025, particularly during the year-end peak shopping season. Structural tailwinds are also emerging from tighter oversight of the informal retail sector, creating a more favorable competitive environment for well-managed formal retailers. Accordingly, MSVN forecasts sector profit growth of 55% and 26% year on year in FY2025 and FY2026, respectively, with MWG and MSN remaining the key drivers.

Valuation and Stock Selection

Despite the VN-Index rising nearly 33% year to date, listed retail stocks have underperformed the broader market. MSVN attributes this underperformance to overly cautious market sentiment toward domestic consumption.

From MSVN’s perspective, the market is overreacting to short-term concerns while overlooking the sector’s strong earnings growth potential in the 2025–2026 forecast period and its attractive long-term fundamentals. This presents an appealing opportunity to accumulate high-quality retail stocks at discounted valuations, with forward P/E multiples for 2025–2026 below both trailing 12-month levels and the three-year average.

MSVN expects Vietnam’s solid economic recovery and sustained corporate earnings growth in the coming quarters to drive a sector re-rating. In addition, a potential upgrade to emerging-market status could directly benefit large-cap stocks such as MSN, and indirectly MWG and PNJ.

Preferred picks remain market leaders in their respective segments, supported by sustainable competitive advantages, strong fundamentals, and proven execution capabilities—well positioned to lead the recovery in the 2025–2026 forecast period and capture long-term growth opportunities. Given attractive valuations and multiple re-rating catalysts, MWG and MSN are MSVN’s top picks over the next 12 months.

MSVN also maintains BUY recommendations on PNJ and DGW. With a longer-term view, FRT is seen as an investment opportunity to capture the growth potential of modern pharmaceutical retail and the expansion of healthcare services in Vietnam.