Retail growth falls to 1.8% in 3Q19

by FARA AISYAH / pic by MUHD AMIN NAHARUL

MALAYSIA’S retail industry growth slumped to 1.8% in the third quarter of 2019 (3Q19) from a 6.7% growth in the same quarter last year, said Retail Group Malaysia (RGM).

The latest quarterly result was below market expectations as members of the Malaysia Retailers Association (MRA) projected an expansion of 3.2% in 3Q19.

“The high growth rate (in 3Q18) was fuelled by the remaining two months of the tax break, before the Sales and Services Tax was re-introduced in September 2018. Malaysian consumers rushed to retail stores to buy more in order to save more.

“For the month of September 2018, many retailers maintained their prices in order to attract shoppers to buy,” RGM said in a statement yesterday.

The strong result achieved a year ago contributed to the lower growth rate in 3Q19, which was also weaker than the 4.5% increase registered in 2Q19. Low consumer confidence levels, coupled with an unsettled global market environment and slow domestic economic activities, also led to poor sales in 3Q19 as consumers were discouraged to spend more.

For the first nine months of this year, the retail sales growth rate came in at 3.6%, compared to the same period a year ago. Many members of the MRA are not optimistic about their businesses for the next three months, with an estimated average growth of 2.7% for 4Q19.

As such, RGM has revised downwards its expected retail growth for 4Q19 to 3.8% from 5.8% previously, while full-year growth is forecast at 3.7% versus the previous estimate of 4.4%.

Based on the latest revision, the total sales turnover for Malaysia’s retail industry in 2019 is expected to stand at RM 107.5 billion.

Department store cum supermarket operators are expecting their businesses to rebound in 4Q19 with a growth rate of 3.6%. Similarly, department store operators are looking forward to their businesses bouncing back strongly with an expansion rate of 4.4% for the last three months of 2019.

Supermarket and hypermarket operators expect their businesses to remain in the red with a -9% growth rate in 4Q19.

The business of retailers in the fashion and fashion accessories subsector is expected to achieve a 5.6% increase in retail sales during the 4Q19. Retailers in the pharmacy and personal care subsector are expecting to maintain their growth at 9.6% in the October-December 2019 period.

For the other specialty stores subsectors (including photo shops, toys stores and fitness equipment stores), retailers expect their businesses to grow by 0.8% in 4Q19 compared to the same period a year ago.

For 2020, RGM projects local retail sales to rise by 4.6%.

“This coming new year will remain a challenge for the Malaysian retail industry.

“Externally, trade disputes between countries are not expected to end soon. Internally, economic policies that can stimulate consumers’ spending are limited in the near term,” the firm noted.