Spending shift under subsidy programme pressures Thai grocery sector

Spending expected to normalise after programme ends in September.

Thailand’s retail sector may see a shift in relative performance between grocery and home improvement retailers, according to CGS International.

The report noted that the government’s Thai Help Thai Plus programme could temporarily pressure grocery and convenience store operators as consumers adjust spending to maximise subsidy benefits and shift toward traditional trade channels.

“Given that the programme is significantly larger than previous co-payment schemes, we believe consensus' earnings estimates for some grocery retailers may still face downside risks,” it said.

The firm also said that the market is currently rewarding retailers benefiting from temporary earnings tailwinds whilst penalising those facing policy-driven headwinds, though this dynamic may soon reverse.

It suggested taking profit in home improvement stocks whilst selectively accumulating grocery retail names ahead of a normalisation in spending patterns after the scheme expires on 30 September 2026.

CGS International also highlighted that Thailand’s home improvement sector may be approaching the end of its current strong cycle.

“The home improvement sector has enjoyed one of its strongest operating environments in years,” it said.

Recent performance has been supported by pre-buying activity driven by concerns over construction material prices and elevated inventory levels that have widened margins between selling prices and historical costs.

“As a result, 2Q26F could mark the strongest earnings quarter of the current cycle,” the report said. “However, we believe investors should be careful not to extrapolate temporary tailwinds too far into the future.”

Looking beyond FY26F, CGS International said that risks to earnings may increase as demand pull-forward effects fade and inventory-driven gains normalise.

It also pointed to structural headwinds including weak housing affordability, elevated household debt, and ageing demographics, which are likely to limit long-term growth in home improvement demand.

It added that the market may be overly focused on near-term earnings upgrades whilst underestimating potential downside risk to FY27F forecasts.