Malaysia’s retail sector is expected to record a negative growth of 18.8% in 1Q20 with a decline of 5.5% for the whole of 2020, says RGM MD

by FARA AISYAH/ pic by MUHD AMIN NAHARUL

RETAIL sales in April is expected to plunge by 60.7%, costing billions in sales, as most shops remain shuttered until the end of month as the country wages an all-out war against the coronavirus, said a retail association.

The projection by Retail Group Malaysia (RGM) is based on the extended Movement Control Order (MCO) until April 28 and the businesses that are allowed and prevented from operating.

RGM MD Tan Hai Hsin said the whole of April remains under the MCO, with essential retailers continuing to operate while a small number of non-essential vendors allowed to open during the last two weeks of the month.

“Based on the retail sale performances of essential retailers during the first two weeks of the MCO, as well as the assumption of zero income for almost all the non-essential retailers, the month of April is expected to contract by 60.7% in retail sales compared to the same month of 2019,” Tan said in a market report.

The retail sales projection, however, did not provide a figure of sales value.

Malaysia’s sales value for the wholesale and retail trade was valued at RM109 billion in February this year and that figure includes big ticket items like car purchases.

The 60.7% sales value plunge is expected as more than 209,000 retail stores — including 90% of stalls and markets which accounted for 61% of total retail outlets and 63% of total retail sales in the country — are forced to cease operation.

More than 732,000 retail employees are required to stay at home during this period without work, he said, adding that these retailers continue to shoulder operating expenses of about RM20.5 billion for the six-week MCO period.

“The total retail operating cost is estimated at RM14.3 billion during the six-week period.

“During the six weeks of business closures, non-essential retailers still need to pay an estimated RM6.2 billion in staff cost including salaries and wages, allowances, Employees Provident Fund contributions and Social Security Organisation contributions,” Tan added.

He said about 126,000 retailers — including 10% of stalls and markets — remain open during the MCO, representing about 37% of the total retail outlets in Malaysia. Tan said their combined sale turnover accounts for 35% of the total retail turnover.

Based on the association estimates, the sector posted a 20.1% decline in sales February due to the rapid spread of the coronavirus as tourist arrivals declined significantly.

“The fear of virus pandemic had affected consumers’ spending during the first two weeks of March 2020. The partial lockdown on the last two weeks of March led to zero revenue for non-essential retailers in the whole country,” according to the report.

For the month of March, Malaysia retail industry’s revenue is estimated to contract by 28.9% compared to the same period in 2019.

“For the first quarter of this year (1Q20), Malaysia’s retail industry is expected to record a negative growth of 18.8% compared to the same period last year,” Tan said.

For 2020, he said Malaysia’s retail industry is expected to suffer a decline in sales of 5.5% compared to a 3.7% growth last year.

Tan said the retail industry is expected to suffer a decline in sales of 9.3% in 2Q20, taking into consideration the four weeks of MCO in April, as well as the expected slow sale for the Hari Raya Aidilfitri celebration.

“Assuming the domestic economy will recover from the second half of this year, Malaysia’s retail industry growth rates for 3Q20 and 4Q20 will be 2.5% and 3.3% respectively,” he added.

But grocery retailers, including supermarkets, hypermarkets, minimarkets, provision shops and convenience stores, are thriving.

The business of grocery retailers climbed 20.9% during the first week of the MCO when Malaysians rushed to stock up foods and basic necessities, he said.