Phillip Securities Thailand stated that Thailand’s retail sector is currently navigating a challenging environment, primarily driven by a pronounced economic slowdown that is significantly impacting consumer purchasing power. This weakened power is attributed to factors such as high household debt and increased import tariffs from the US. In a reflection of these pressures, the Bank of Thailand has revised its 2025 GDP forecast downward to 2.0%, a notable drop from the earlier projection of 2.8% at the start of the year.
A key indicator of the sector’s performance, same-store sales growth (SSSG), has seen a continuous decline following the recovery period after the COVID-19 pandemic.
The impact of this downturn varies significantly across different retail segments. For retailers focusing on staple goods, such as food, beverages, and essential household items, sales typically do not decline significantly during economic downturns, as these are necessary for daily consumption. Companies like CPALL and CPAXT, which operate in this segment, are expected to maintain SSSG better than others. However, their sales growth during an economic recovery is generally not as strong as that seen in other segments.
Conversely, the fashion and durable goods segment—which includes items like electronics, furniture, and fashion—experiences a more significant drop in sales. These are considered non-essential or long-lifespan items that consumers tend to delay purchasing during tough times. Retailers in this area, such as HMPRO, DOHOME, and ILM, could see SSSG reduced from the previous year. However, when the economy recovers, the rebound in sales in this segment is typically much stronger than for staple goods.
In response to the challenging SSSG trend, store expansion has become a crucial strategy for companies to boost overall sales and maintain some growth despite the unfavourable economic climate. This strategy is also seen as vital for positioning companies to benefit from sales rebounds per store when the economy eventually improves.
Adding to the bleak outlook, consumer confidence continues on a downward trajectory. The index dropped in April 2025, reflecting concerns over the Thai economic situation, international trade uncertainties due to US tariffs, a decline in foreign tourist numbers, decreasing agricultural product prices, and high household debt. This declining confidence is anticipated to lead to more cautious spending, further pressuring SSSG, particularly for fashion and durable goods retailers. Currently, there are no signs indicating a near-term economic recovery.
Still, Phillip Securities rates “Buy” on CPALL (TP THB72), CPAXT (TP THB31.50), CRC (TP THB32.00), HMPRO (TP THB9.15) and ILM (TP THB25.00), while rates “Sell” on DOHOME (TP THB2.12).
