oth for HomePro and its major competitors – Central Retail’s Thai Watsadu and Siam Global House – because it gives them a massive opportunity to scale up by consolidating the smaller players, a process that has occurred repeatedly in other countries. One only has to think of Bunnings and Mitre 10 in Australia, or Home Depot and Lowe’s in the US to see how the sector is eventually dominated by a couple of operators. For now, HomePro operates 92 HomePro and 21 Mega Home stores in Thailand, plus seven in Malaysia. Forty of its 113 stores in Thailand are in the Greater Bangkok area. Seven more stores are planned for opening this year. With the pandemic fading in the rearview mirror, inflation becoming more subdued and consumer confidence returning, the home improvement sector is heating up along with Thailand’s summer weather. In the first quarter of this year, total revenues for HomePro increased by 9.5 per cent on a year-on-year basis. Revenues were 17.2 billion THB, or about US$553 million (A$837 million) at current exchange rates. Net profit came in at 1.6 billion THB, or about $72 million. The company believes sales are now on a sustainable pathway, following 7.5 per cent growth in 2022, bringing total retail sales to 65.1 billion THB ($2.98 billion) for the year. This was a significant milestone because, after a slump lasting two years, it finally brought sales above the level of 2019.  Its bottom line is, however, not immune to cost pressures such as the rising interest rates that have driven up its financing costs a staggering 42 per cent in the first quarter of this year compared with a year ago. It is also battling the galloping cost of electricity to keep the lights on in its cavernous warehouse stores. It has been aggressive in its pursuit of ways to cut back power consumption from external sources by installing more solar panels on the rooftops of its stores. This also, coincidentally, reduces its carbon footprint, a plus for a company that is boisterously committed to ESG principles. At the same time as it battles the rising costs of doing business, HomePro is increasing its services; for example, in the area of home installation of those same solar panels and by expanding trade-ins of used home goods. It is also continuing to extend its menu of private-label merchandise, which drives higher gross margins. It now has 36 private brands covering more than 15,000 products. HomePro is a landlord, too Like most large retailers in Asia, HomePro is a landlord as well. HomePro sublets space for the sale of complementary products inside its stores. But it also owns an extremely popular shopping mall called Market Village in the seaside resort of Hua Hin, a few hours southwest of Bangkok. Hua Hin, though not as well known to foreign tourists as resorts like Phuket, is growing in importance, and Market Village is becoming a money spinner for HomePro as the recovery of international tourism continues to strengthen. Rental income increased by 16 per cent in the first quarter on a year-on-year basis, and is now a meaningful 2.6 per cent of total company revenue. Although economic growth is important to the home improvement industry, the sector benefits from important structural growth engines. Thailand’s population has been growing at a rate of about 0.2 per cent in recent years, not as fast as some of its ASEAN neighbours like Cambodia, Vietnam and Philippines, but still enough to add materially to a population that already exceeds 71 million people. From a retail standpoint, what is more important is that the population has been experiencing the rapid disposable income growth that goes with urbanisation. Better yet, the urban and middle-class growth is not occurring exclusively in Bangkok: governments at the national and provincial levels are working strenuously to balance growth across the country as a whole, creating more and better retail markets outside the capital. This resonates well with companies like HomePro because of the massive opportunities in home construction, renovation and furnishing. For better or worse from a social standpoint, HomePro and its industry peers are also benefiting from the breakup of the traditional Thai extended family: average household size has about halved since 1970, meaning more households and, well, more houses. The big home improvement retailers, HomPro among them, have not been shy about extending their product and service offering onto the turf of other retail categories. For example, they tend to have comprehensive ranges of white goods, indoor and outdoor izefurniture, digital products and even sporting goods. As a result, the home improvement sector garners more revenue by making a contribution to the outfitting of Thai homes. Enough to go around Despite HomePro being the clear market leader, there is plenty of business for others. HomePro has a couple of large competitors. Runner-up is Central Retail’s Thai Watsadu, which is now increasingly being doubled up with Central’s home décor concept BnB Home. The probable number three in the market is Siam Global House, which has nearly 80 stores in Thailand and aims for more than 100 by 2025. Global House is headquartered in the northeastern provincial city of Roi Et and it has a heavier concentration of stores in that region than HomePro or Thai Watsadu, which are much stronger in the Bangkok metropolitan area. Global House had total revenue in 2022 of 36 billion THB (A$1.67 billion), making it about half the size of HomePro in terms of sales. A rosy outlook HomePro can grow by consolidating the fragmented market and by riding on Thailand’s favourable demographics and economic outlook. Consumer confidence has been edging up incrementally every month for almost a year and now sits at its highest point since immediately prior to the pandemic in February 2020. Inflation has slowed to a respectable 2.83 per cent in March. Tourism is recovering. A repeat of last year’s devastating floods that suspended construction activity in parts of the country for months seems unlikely. Is there anything not to like?