Retail : May24 channel check: sustaining decent traffic, higher promotions but in-line with seasonality (OVERWEIGHT)

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Retail

May24 channel check: sustaining decent traffic, higher promotions but in-line with seasonality

Our retail channel checks in May24 show decent mall traffic at weekends and long weekends bodes well for promotions.
MAPA offers broader brand promotions following the end-of-season sale, MAPI is offering selective promos on fashion brands.
ACES is continuing its thematic and cashback promotions which will sustain SSSG at the mid-single digit level. Maintain Overweight.

Decent traffic in May24, albeit may be partly supported by holidays.

Our weekly retail channel check on week of 3-31 May24 indicates decent traffic in the major retail malls and shopping centers. We think this is an encouraging indication amidst concerns over purchasing power, although traffic may partly be supported by the extra long-weekends during the month. We particularly note strong traffic in ACES and as such, we expect ACES’ SSSG to be sustained at around the mid-single digit level in May24 (Apr24: 6.8%). Other retailer i.e MIDI stated that its May’s SSSG remains strong at double digit (Mar24: 13.7%).

More promos post the end-of-season sale, but still inline with seasonality.

We observed more promos across the brands under MAPA (e.g, discounts in Planet Sports, Sports Station and several key brands). Interestingly, this is matched by rival JD (under ERAA IJ) for several brands (e.g, New Balance, Nike, Converse, Puma, Adidas, Asics, and other brands). For MAPI fashion outlets, promotions are relatively unchanged over the past 2 weeks. On ACES, we noted continuing thematic promotions which may partly explain the strong May24 traffic. AMRT is promoting cooking oil, instant noodles, and other select items under promotion. Overall, we believe the recent promotional activities still fall inline with the seasonality post Idul Fitri holiday, approaching the school holidays/back to school month of Jul24. We also think the steady May24 traffic should translate into healthier inventory days for the retailers under our coverage (1Q24 MAPI: 133, MAPA: 196, ACES: 250 days, with expected improvement for MAPI and MAPA to FY24F 126 and 185 days).

2Q24 revenue will be in line with the seasonality

We believe our observation of steady May24 traffic is encouraging as it should translate into 2Q24 solid revenue that is in-line with trend post the Ied festivities season and supported by school holidays in Jun24. Within our coverage, we estimate ACES to book the best performances vs peer in 2Q24, supported by solid top line and higher margins. For MAPI & MAPA, concerns on opex/margin might hinder strong earnings growth.

Maintain Overweight amid on-track performances

Concerns on purchasing power and seasonality post Ramadhan have put pressure on the retail sector. We believe the decent May24 traffic should indicate on-track operating performance (FY24F EPS growth forecast of 13.5%). Maintain Overweight with our pecking order: ACES, MAPA and MAPI.

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