oils in a fiercely competitive market with a cash-strapped core customer.  The Makro brand, meanwhile, is thriving. It operates 163 units with an average size of just over 5,200 square metres, but 80 of them are much bigger than that: cavernous warehouses where retail buyers and end consumers load up oversized shopping carts with bulk items at wholesale prices.  Lotus’s, for its part, operates 2,654 retail stores, of which 225 are hypermarkets, 182 are supermarkets and 2,182 are mini-supermarkets that resemble convenience stores in size and product offering. These latter compete head to head with 7-Eleven, operated by another arm of CPG, Central Retail’s Family Mart, and Big C’s various small formats.  The Makro and Lotus’s businesses, despite some obvious synergies, are not moving in lockstep. In its first quarter results released in May, the Makro side of the Siam Makro business reported year-on-year sales growth of 13 per cent, with same-store sales growth at 10.9 per cent. Net profit was up by 8.9 per cent. Retail, however, (the Lotus’s part) is stagnating, increasing just 0.8 per cent in the first quarter of 2023 compared to a year ago. Same-store sales growth was almost flat-lining at 0.5 per cent. The bar had been set very low: same-store sales fell by -1.4 per cent in the corresponding quarter last year, so the ‘two year stack’ is a miserable -0.9 per cent, well behind the rate of inflation. Retail’s weak revenue growth showed up on the bottom line, with net profit from retail stores falling 12.8 per cent year-on-year in the first quarter.  A bright spot is mall income: Lotus’s leases a lot of space to small retailers both within its own hypermarket walls and in the full-blown shopping malls that the hypermarket typically anchors. Tenants are usually in categories like restaurants and small takeaways, financial services, mobile wireless and phones, pharmacies, jewellery, eyewear, apparel basics and footwear. Revenue from this source grew 10.9 per cent year on year, helped by a 4 per cent increase in mall leasable area. Mall revenue is now almost 3 per cent of total revenues, not huge but certainly meaningful. One of the company’s priorities is repurposing space to make it available for leasing, getting occupancy up from its current rate of around 90 per cent, and pushing up rents. A nice game of tennis Lotus’s was expected to benefit from synergies with other entities across CPG but there was a certain amount of emotionalism behind the acquisition from Tesco PLC in 2020, which came as the latest shot in a game of tennis in which Lotus’s was the ball. Lotus’s (or what was then Lotus before CPG rebranded it) had been owned by CPG until the Asian financial crisis forced it to sell to Tesco in 1999. Just over 20 years later, Tesco hit the ball back to CPG after finding its own position in the Southeast Asian market untenable. Lotus’s butts heads with some heavyweight competitors, including BJC’s Big C, which, as it turns out, is also not setting the world on fire. Sales growth at Big C’s stores in the first quarter was 2.8 per cent year-on-year, better than Lotus’s but only by the economic equivalent of a nose.  A second major competitor across food, hardlines and fashion retail – Central Retail – appears to be taking market share from both Lotus’s and Big C with 12 per cent revenue growth in the first quarter. Central operates in all of the other two’s merchandise spaces, including groceries, but it differs from Lotus’s and Big C in not having a lot of one-stop-shop hypermarkets or one-on-every-street-corner convenience stores. Instead it operates enclosed regional and superregional malls that house its own conventional supermarkets (Tops), department stores and a range of specialty formats. Central’s differentiated selling platform and more affluent customer base is helping to drive stronger sales growth than its competitors: Same-store sales growth in its supermarkets was 8 per cent in the first quarter and for fashion it was a spectacular 31 per cent. Central also hammered the other two on rental income, which grew by 28 per cent. On the cost front: good news and bad news Hand-wringing about rising costs has been such a corporate staple in the past two years that it will be a difficult habit for executives to shake even when costs fall, as, in fact, they are now doing. In Thailand, the Producer Price Index (roughly speaking, an index of wholesale prices) has been edging downward on a year-over-year basis since March, thanks mainly to falling prices of industrial goods. That’s good news for retailers. Admittedly, those prices were falling from a very high base, but it is still a promising trend that is expected to continue. Even so, operating costs for all three companies were up sharply in the first quarter. The first bit of bad news (sorry, there are two items in the bad news column) is that wholesale prices for some key products, most notably food, continue to rise.  The second piece of bad news is that most retailers are being hit hard by higher financing costs because of rising interest rates. For Siam Makro as a whole (Makro + Lotus’s), finance costs increased by 26.8 per cent year on year in the first quarter. For Big C, finance costs grew by 3.7 per cent but for Central Retail it was much worse, with finance costs increasing 33 per cent. For Lotus’s, the cost pressures are only one part of the problem. Despite its union with Siam Makro under Thai ownership, Thai consumers still haven’t shown it as much love as CPG had hoped, at least not yet and that is keeping a tight lid on the top line.