Maybank downgrades Thai retail sector on weak sales, consumption

[SINGAPORE] Maybank Investment Bank has downgraded Thailand’s retail sector to “neutral” amid weak consumption and falling same store sales growth (SSSG). 

The bank’s analyst, Suttatip Peerasub, added in a note on Friday (Jun 13) that most of the kingdom’s retail operators are unlikely to report year-on-year earnings growth in Q2, with the exception of 7-Eleven convenience store operator CP All as well as CP Axtra, which operates the Makro wholesale chain and Lotus’ supermarkets across the region.

Also included in the report were updates on other major retail players. These include Central Retail Corporation, a fashion, food and hardline retailer with products across Thailand, Vietnam and Italy; and Home Product Center, a home improvement retailer with presence in Thailand, Malaysia and Vietnam.

The report also covered Berli Jucker, a consumer products and packaging company; Siam Global House, a large-format hardware and construction materials retailer; and Dohome, a similar home improvement and hardware chain.

Poor sales growth

Providing a snapshot of the SSSG for April to May, Peerasub noted that both consumer staples and discretionary retailers saw weaker performance, with SSSG ranging from -5 to 0.5 per cent, compared to -4 to 3 per cent in Q1 2025. 

CP Axtra was the best performer, with slightly positive wholesale (Makro) SSSG and flat growth for its retail arm (Lotus supermarkets), supported by promotions and healthy demand from the hotel, restaurant and catering segment.

Meanwhile, home improvement retailers continued to underperform, with SSSG ranging from -3 to -11 per cent, down from -10 to 0.5 per cent in Q1.

For instance, Home Product Center’s Mega Home and Dohome posted SSSG of -3 per cent and -5 per cent, respectively, compared with 0.2 per cent and -0.5 per cent previously.

Peerasub said the weaker sales performance was due to a range of “unfavourable factors”, including muted consumption, a decline in the consumer confidence index, fewer tourist arrivals and a subdued economic outlook.

Weather and environmental events also affected footfall and sales. Thailand’s unusually cold spell in Q1, with temperatures falling by up to 6 degree Celsius, dampened demand for cooling products such as air conditioners, electric fans and refrigerators.

The onset of the rainy season on May 15 further reduced customer traffic and construction activity.

Peerasub also cited the Mar 28 earthquake in central Myanmar – which led to the collapse of a Bangkok skyscraper – as a contributing factor, with demand for renovations still pending insurance claims.

Outlook

Maybank expects most retailers under its coverage to report flat or worse Q2 results year on year, dragged by weak SSSG.

In contrast, CP All and CP Axtra are projected to deliver earnings growth, underpinned by moderate SSSG, continued store expansion and improved gross margins – the latter driven by a greater contribution from high-margin products and synergy gains from their recent amalgamation.

Peerasub said retail SSSG is likely to remain negative in the third quarter due to seasonal effects and tepid consumer sentiment. However, she expects a mild recovery in Q4, buoyed by Thailand’s festive season and an anticipated stimulus package from the Thai government.

Still, Maybank sees downside risks to earnings forecasts for home-improvement retailers, given weaker-than-expected SSSG.

Peerasub named CP All as the bank’s top pick, with a “buy” call based on its resilient growth, strong return on equity and attractive valuation – the stock is trading at 15 times FY2025 estimated earnings, or 1.5 standard deviations below its five-year average.