Thailand's retailers gear up for rosier sales

They are expecting govt stimulus package to top $67b amid record tourist numbers

BANGKOK • In a downtown Bangkok mall, ripped jeans and mirror sunglasses aimed at fast-fashion teens show how Thai retailers are getting ready for the next big thing - a government stimulus package they are betting will revive sales after years of stagnation.

The goods are on sale in American brand Aeropostale's first Thai store, recently opened in a joint venture with Robinson Department Store. The country's third-biggest retailer plans to open 15 of the shops this year, even if Aeropostale's allure has faded back home.

Thai luxury malls, department stores and hypermarkets are all opening new outlets.

Amid record tourist numbers, the military government is preparing long-term stimulus spending that retailers see topping US$50 billion (S$67.8 billion) to support a fragile recovery from 2014, when months of street protests and a coup brought South-east Asia's second-biggest economy to a standstill.

"The economy is recovering slowly," Mr Dissatat Wisetvara, Robinson's chief financial officer, said in an interview. "We hope the stimulus measures will help spur the economy and purchasing demand and start having an impact from June."

REVIVING GROWTH

The economy is recovering slowly.

We hope the stimulus measures will help spur the economy and purchasing demand and start having an impact from June.

MR DISSATAT WISETVARA, Robinson's chief financial officer.

Announced in March, with more infrastructure spending due by June, the stimulus comes amid signs that consumers are ready to respond quickly. For instance, same-store sales picked up in the fourth quarter after the junta moved to cut some taxes to spur end-of-year spending.

Before the stimulus package kicks in, expectations for growth this year in a sector worth US$90 billion in annual sales have been pegged at 3 per cent by the Thai Retailers Association, the same as in last year. Still, retailers hope the growth rate will tick up towards the average of 7 per cent to 8 per cent per year in the past decade.

Thailand is expecting a record 32 million tourists this year - good news for the country's luxury retailers.

In one response, Central Group, a retail to real estate conglomerate, plans to invest 6.5 billion baht (S$250 million) this year to expand its high-end Central Embassy mall in Bangkok.

Foreign retailers are also showing growing interest: Japanese department store operator Takashimaya will open its first store in Thailand at a new mixed-use luxury project called Icon Siam next year.

Retailers in the north, as well as those in Bangkok and Thailand's islands, are seeing the benefit of the rising numbers of tourists. Hypermarket operator Big C Supercenter has said that it will expand its chain and also add 78 smaller- sized outlets in urban locations, while CP All aims to open 700 new franchised 7-Eleven convenience stores this year.

"The worst is over for retail," said Mr Chatrchai Tuongratanaphan, director of the Thai Retailers Association.

But it will not be plain sailing. Record household debt built up under the free-spending government that the junta toppled in May 2014 remains a constraint. "We don't expect to see a strong (short-term) pickup, given low- income earners have not fully recovered," Mr Chatrchai said.

Any delay in infrastructure spending would also be a risk to a recovery that remains tentative: The central bank on March 23 cut its 2016 growth forecast to 3.1 per cent from 3.5 per cent.

But that would still mean acceleration from last year's 2.8 per cent growth, and the government measures, including new tax rebates, should act as an intermediary spur to boost consumer spending.

Citigroup economists said the tax rebates could boost economic growth by 0.1 per cent, stoking spending by consumers before investment in infrastructure materialises.

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 07, 2016, with the headline 'Thailand's retailers gear up for rosier sales'. Print Edition | Subscribe