Commerce – Sector SSS remains subdued in 3Q26TD

Sector SSS continued to contract in 3Q26TD, but at a slower pace than in 2Q26. Sector SSS improved marginally to -1.4% YoY in Jul-Aug 2026 from -1.5% YoY in 2Q26. Within staples, average SSS improved to +0.4% YoY from -0.6% YoY in 2Q26, as most operators managed the impact of the Thai Help Thai Plus scheme more effectively through company-specific initiatives, including CPALL's stamp campaign and long-holiday spending, BJC's Donjai and O2O initiatives, and CRC's FIFA World Cup promotion in July and sticker campaign in August for Tops. Meanwhile, average discretionary SSS weakened to -2.3% YoY from -1.5% YoY in 2Q26, reflecting soft construction-material demand and delayed purchasing decisions amid continued declines in steel prices.

CRC and CPALL led positive SSS performers in 3Q26TD. Among retailers with positive or stable SSS, CRC delivered the best performance among rated names, with SSS improving to +1.5% YoY in 3Q26TD (vs. +0.7% YoY in 2Q26), supported by positive Thailand and Vietnam SSS. Food SSS rose 5% YoY on FIFA World Cup-related demand and the sticker campaign, while Fashion SSS increased 1% YoY, supported by new brand launches and strong sales at tourist-focused stores such as CentralWorld, more than offsetting weaker Hardline SSS of -1.5% YoY. CPALL followed with SSS growth of +1.2% YoY (vs. +0.8% YoY in 2Q26), backed by long-holiday spending and its stamp campaign. CPAXT B2B improved to +1% YoY (vs. -0.9% YoY in 2Q26), driven by stronger dry-food sales from food retailers participating in the Thai Help Thai Plus scheme. BJC's SSS was flat YoY, improving from -2.1% YoY in 2Q26, as stronger Donjai and O2O sales helped offset the scheme's impact. DOHOME (Not Rated) posted SSS growth of +5% YoY (vs. +1.8% YoY in 2Q26), driven by stronger government project sales and a favorable base effect from last year’s double-digit decline in steel sales.

Weak demand in 3Q26TD continued to weigh on negative SSS retailers. Among retailers with negative SSS, CPAXT B2C declined to -5% YoY in 3Q26TD (vs. -3.9% YoY in 2Q26) due to the continued impact of the Thai Help Thai Plus scheme. HomePro's SSS softened to -3% YoY from -1% YoY in 2Q26, while MegaHome improved to -1% YoY from -4.1% YoY despite continued pressure from weak construction demand and falling steel prices. GLOBAL reported SSS of -5.8% YoY (vs. -4% YoY in 2Q26), with declining steel prices continuing to weigh on purchasing decisions.

2Q26 earnings recap. Sector core earnings grew 7% YoY but -17% QoQ in 2Q26, with YoY growth driven primarily by margin expansion across most operators from a favorable product mix, lower input costs and a higher contribution from private-label products. CRC (+27% YoY), HMPRO (+14% YoY) and GLOBAL (+84% YoY) led earnings growth, while CPALL (+6% YoY) continued to benefit from resilient consumption and CVS margin improvement. In contrast, CPAXT (-18% YoY) was the only major laggard, due to weaker gross margins and higher SG&A expenses.

3Q26F earnings outlook. We expect sector earnings to grow slightly YoY but decline QoQ on seasonality in 3Q26F. CRC is expected to be the standout performer among discretionary retailers, driven by improving SSS and margin expansion, while CPALL should remain the key staples outperformer, supported by solid CVS SSS growth and continued margin improvement.

Top picks: CRC and CPALL. We favor CRC as the strongest discretionary play, supported by SSS recovery and margin expansion, which should drive robust earnings growth in 3Q26F. We also favor CPALL as the leading staples play, underpinned by positive CVS SSS, continued margin improvement and potential upside from a recovery in consumption after the Thai Help Thai Plus scheme ends in 4Q26F.

Key risks are changes in government policies and purchasing power. Key ESG risks are energy & waste management, sustainable products (E) and product quality management, labor practices and data privacy (S).