Recovery in sight for retail industry on positive 2Q growth

by HARIZAH KAMEL / pic by MUHD AMIN NAHARUL

MALAYSIA’S retail industry recorded positive growth in the second quarter of 2021 (2Q21) and expects to gain momentum on its recovery by the end of the year.

According to Retail Group Malaysia (RGM), the industry recorded a growth rate of 3.4% in retail sales for 2Q21.

“The positive growth rate during the quarter was solely due to the low base effect a year ago. During the second quarter of 2020, Malaysia’s retail industry suffered a year-on-year decline of 30.9% because of business closures,” RGM said in its Malaysia Retail Industry Report September 2021 published yesterday.

Retail performances during 2Q21 had been affected by a series of lockdowns.

RGM said shopping traffic recovered when Movement Control Order (MCO) 2.0 ended in March.

Although Malaysia was under Conditional MCO during the first month of 2Q, shopping malls in all major cities received large crowds on the first weekend after MCO 2.0 was lifted.

Some tourist areas also received good crowds during the weekends.

Performances of retail sub-sectors during the quarter were mixed with numerous retail sub-sectors being severely affected because their physical stores stayed shut for a long period of time.

Department store and supermarket sub-sector recorded a negative growth rate of 7.5%. On the other hand, retail business in the department stores sub-sector rebounded by 18.2% after a huge dip in business during 1Q.

Despite being allowed to open throughout the pandemic, the supermarket and hypermarket sub-sector contracted by 12.3%.

On the contrary, the mini-market, convenience store and cooperative enjoyed a moderate growth rate of 2.6% in retail sales.

The pharmacy sub-sector reported a positive growth rate of 10% while the fashion and fashion accessories sub-sector managed to turn around with a growth rate of 17.6%.

The remaining sub-sectors recorded a decline in growth rate namely children and baby products (17.4%), personal care (36.1%), furniture and furnishing, home improvement, and electrical and electronics (1.1%), and other specialty stores (41.4%).

For the next three-month forecast (3Q21), RGM said Malaysia Retailers Association and Malaysia Retail Chain Association project an average growth rate of 15.1%.

“Physical stores of the majority of retail trades were shut during the first half (1H) of 3Q21. Except for operators of mini-market, convenience stores and cooperatives, retailers in all retail sub-sectors foresee downward movement in their sales,” it said.

Departmental stores cum supermarket operators are expecting their sales to worsen with a negative growth of 25.5% for the 3Q.

After a temporary rebound, department store operators are expecting their businesses to decline with a negative growth rate of 11.2% for the third three-month period of this year.

Meanwhile, RGM has revised Malaysia’s annual retail industry growth rate for 2021 from 4% to 0.8%.

It noted that the interstate travel ban is expected to be relaxed from the middle of October 2021 after 90% of the adult population has been fully vaccinated, adding that domestic tourism will bring more sales to retailers that have been depending on tourism spending.

The report also stated that Malaysia will witness rising foreign tourist arrivals only from 1H22 as travel bubbles with selected countries will likely begin towards the end of this year.

RGM expects the retail industry to gain momentum on its recovery by year-end and maintain its estimate at 12.7% for 4Q21.