Drought holds back Thailand's retail store expansion
By Khettiya Jittapong BANGKOK (Reuters) - Sales have fallen at all but one of Thailand's major supermarket retailers as the worst drought in a decade strikes at the heart of the farming sector - the backbone of the rural economy - and frustrates plans to open more stores in the provinces. Big C Supercenter, Thailand's second-biggest hyper mart chain after Tesco PLC, suffered a 5.2 percent slide in third-quarter same-store sales growth (SSSG) from a year earlier, the most among its peers. About half of Big C's sales come from the country's interior where consumers are concerned about drought, low crop prices and a weak economic outlook, analysts say. Tesco's Thai unit does not report quarterly SSSG numbers. Big C, majority-owned by Casino Group in France, has reduced its pace of expansion like many other cautious retailers. That's in sharp contrast to the sector's aggressive expansion plans just a few years ago. CP All, controlled by billionaire Dhanin Chearavanont, is taking a different tack. The operator of Thailand's 7-Eleven stores is forging ahead with its expansion, partly to help offset slower sales at existing stores. That strategy seems to be working - same-store sales rose 1.6 percent in the third quarter. CP All was also the only retailer with any growth in sales. The company plans to open at least 600 stores a year to increase the total number of stores to 10,000 by 2018. Analysts say retailers' earnings have bottomed in the third quarter, with government measures in place to stimulate consumption in the fourth quarter. That sentiment is reflected in a pickup in consumer confidence in October, the first rise in 10 months. But the road to recovery may be long, as overall consumption could be dragged down by falling farm incomes next year. Weather forecasters say parched conditions could persist through 2017. The agricultural sector is the country's largest employer, accounting for 32 percent of Thailand's labor force. "The impact of the drought will last for a long time, and that will drag down upcountry incomes and the sector's SSSG," said Worrapong Tuntiwutthipong, analyst at Krungsri Securities in Bangkok. "CP All will outperform others in terms of SSSG and earnings growth. Overall, consumption should remain weak, and SSSG will be at low single digits of 1-3 percent in 2016 from 0-1 percent this year." (Editing by Ryan Woo)
