by 7.2 per cent, to 259.8 billion baht (US$7.4 billion), while the retail side was almost flat with last year, edging up just 0.8 per cent to 206.4 billion baht (US$5.9 billion). Most of the remainder consisted of rent from the mall space it leases. Gross profit margin was down slightly, to 13.8 per cent from 14.2 per cent, but a decrease in financing costs enabled the company to deliver a 12.3 per cent higher net profit of 8.6 billion baht (US$247 million). The company ended the year with 168 wholesale units under its various Makro banners, a net growth of six stores after eight openings in Thailand and two closures in China. So the operating and financial results included sales from a larger number of stores, but looked at from the standpoint of floorspace productivity and same-store sales, things were still chugging along just fine. Sales per square meter increased by 2.5 per cent. Makro Thailand’s same-store sales growth was 5.3 per cent, which was achieved despite the deflation in fresh food. Gross profit was about even with last year. These are all good numbers for the Makro wholesale business. The numbers on the retail side are a bit more modest on the surface but not too bad with a little bit of drilling down. CP Axtra’s retail business consists of its Lotus’s chain of hypermarkets, supermarkets and mini-supermarkets (the latter are really smartened-up convenience stores). Sales struggled up 0.8 per cent year-on-year, but the store count was down by about 120, to 2,522. The smaller selling space is more productive, rising by 1.9 per cent for the year while same-store sales were up by 2.1 per cent in Thailand where Lotus’s does the overwhelming majority of its business. The retail gross profit margin was down slightly, to 18.0 per cent from 18.6 per cent primarily due to a change in the mix of sales. There is more good news on the retail side, which is that sales and gross profit trends both improved toward the end of the year. Moreover, the expected synergy between the wholesale and retail side is bearing fruit, quite literally: in 2019 before CP Axtra (then Siam Makro) acquired the Lotus’s business from Britain’s Tesco, fresh food accounted for only 18 per cent of the company’s retail sales. Now that percentage has grown to 27 per cent thanks largely to an infusion of high-quality fresh food from the Makro supply chain. Integrating the supply chains of Makro and Lotus’s continues to be a company priority, along with omnichannel. As noted above, Lotus’s rents space to small tenants, both inside it stores and in its hypermarket-anchored malls. Occupancy has risen, from 90.0 per cent at the end of 2022 to 93.5 per cent a year later, which, together with rent increases, helped drive up rental revenue by almost 6 per cent. Omnichannel set to boom Omnichannel sales accounted for 13.1 per cent of sales and the goal is to reach 15 per cent by the end of 2024 and 25 per cent by 2028. The company believes this is achievable through a combination of a more comprehensive range of products available for sale via its apps, by leveraging stores as fulfillment centers, and by using AI for greater personalisation. Aside from the expected boost to omnichannel (which in any event amounts to more of a channel change than an increase in sales volume) the company, mindful of heightened competition in the market, is intent on improving its food offer through tie-ups with national restaurant brands and smartening up the store experience, although how this last thing will be done is not clear. Expanding the store fleet While driving higher omnichannel sales is near the top of CP Axtra’s list of priorities, the company believes there are opportunities to expand its store fleet as well. It wants to add 6-8 wholesale stores and about 110 retail units (of which about 100 would be the small Go Fresh format) in Thailand and Malaysia per year over the next three years. CP Axtra also wants to increase the mall space it can lease to better utilise the large land area on which its stores operate. It aims to do more than 50 mall extensions over the next few years and 85 mall ‘improvements’. The macro (not Makro) picture clouds the outlook CP Axtra, despite its impressive size and credible strategy, can’t control everything and one thing that is creating a roadblock at the moment is inflation, or rather disinflation. The headline Consumer Price Index fell 1.11 per cent in January from the level of a year ago, more than expected and causing a great deal of fretting from the government, including Prime Minister Srettha Thavisin who indicated that the economy wasn’t doing well — actually, he used the word ‘crisis’ — and it was time the country’s central bank came to the party with a cut in the benchmark interest rate. The Bank of Thailand, however, holds a different view, namely that the economy is not in crisis at all and that its monetary policy stance is basically neutral. The government and the Bank have been at loggerheads for a while and this conflict is nothing new. One thing for sure though is that rates are stressing the many Thai households that borrowed merrily in the Covid years when the cost of money was low. So far, things seem to be holding up on the retail side of things, but companies like CP Axtra will be growing anxious to see if the economy improves or worsens. The first quarter of the year will hold a lot of the answers.