Better contribution from Central Chidlom |
At yesterday’s store visit at Central Chidlom, its flagship luxury department store in Bangkok, we were told the growth in sales and traffic after full reopening on Dec 12 are beating targets. Gross profit contribution from retail sales and rental income from Central Chidlom grew 12% YoY in May-Nov 2024 and will rise further in 2025 off 2024’s low base during renovations plus more focus on clienteling. In 2025, CRC targets high single-digit growth in consolidated sales YoY on better SSS and expansion, with a wider EBIT margin from controlled SG&A/sales. We forecast 12% 2025F core earnings growth, keeping our more conservative assumption of unchanged sales, leaving achievement of its targets as upside. We maintain Outperform with a mid-2025 DCF TP (WACC 7%, LT growth 2.5%) of Bt39.
Full reopening of Central Chidlom to boost CRC’s sales. CRC completed renovations at Central Chidlom with a full reopening on Dec 12 (sales contribution to CRC has not been provided), after stepped reopening starting in May. Gross sales area and number of brands are unchanged at 60,000 sqm and 1,500 brands, but space and brand mix has been adjusted to more luxury and beauty products and fewer mid-priced fashion products. Its key clients are top spenders, “Cenfinity” (spending above Bt600K/year), and families with children, with a greater focus on clients in generations Y and Z and tourists (20% of Central Chidlom’s sales). Central Chidlom expected the renovations to bring 30% growth in total sales and 20% in traffic, which it achieved in May-Nov; it beat targets in Dec. On the consolidated level, CRC observed a steady improvement in gross profit from retail sales (normal products) and rental income (gross sales net cost of sales from consignment luxury products) at Central Chidlom, growing 12% YoY in May-Nov. In 2025, CRC expects contribution from Central Chidlom to rise YoY, off the 2024 low base from renovation plus greater focus on clienteling (matching its sales associates to key customers and offering personal shoppers).
Cautiously positive 2025F guidance. In 2025, CRC targets high single-digit growth in consolidated sales (double Thai GDP growth), boosted by low single-digit SSS growth and store expansion/renovations. In Vietnam, it plans a greater acceleration in food unit expansion. In Thailand, it will slow store expansion in some big formats after an aggressive expansion in 2023-24, particularly Go Wholesale (fine-tuning the business model in terms of product and services to attract more HoReCa customers before further expansion) and Thai Wasadu (matching the economy), with no new department stores (two new stores planned for 2026F) and two renovated department stores (Pinklao and Chang Wattana), amid continued expansion of Tops. EBIT margin will improve YoY, with stable gross margin on an offset of more low-margin food sales (store expansion in Vietnam and Go Wholesale format) with higher margin in all businesses, amid lower SG&A/costs.
SSS in 1Q25TD. We estimate a slightly weaker 1Q25TD SSS vs. 4Q24 at -1% YoY. In Thailand, we believe SSS is weaker than 4Q24’s at -2% YoY; down YoY during Jan 1-15 (negative calendar effect from no e-Receipt program in 2025 vs. 2024) but growing YoY in all businesses on Jan 16-20 (a new e-Receipt program giving the same base). In Vietnam, in the food and hardline units we expect SSS to rise in the high single to double digits YoY in local currency and low to mid single digits YoY in THB vs flat YoY in local currency or -8% YoY in THB in 4Q24F.
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).
