RGM lowers 2017 forecast again after retail sales fall in Q3

PETALING JAYA: Retail Group Malaysia (RGM) has revised its fullyear retail sales growth forecast downwards for the third time since the end of 2016, from 3.7% to 2.2%, after retail sales fell 1.1% in the third quarter (Q3) of 2017.

The contraction in Q3 sales came in below the 2.9% and 4% growth forecasts by the Malaysia Retailers Association (MRA) and RGM respectively.

The drop in sales, amid an encouraging economic backdrop, is partly attributable to the early Hari Raya occasion as well as the weak spending propensity spurred by rising cost of living, which in turn has caused purchasing power to deteriorate, according to the Malaysia Retail Industry Report compiled by RGM, an independent retail industry research firm.

For the first three quarters of this year, retail sales grew 1.9% compared with the same period in 2016.

Based on the latest retail sales forecast revision, the total sale turnover for Malaysia’s retail industry in 2017 is estimated at RM100 billion.

The fashion and fashion accessories segment contracted 4.8% in Q3, while the pharmacy and personal care sector fared well with a 6% growth against the same quarter a year ago.

Meanwhile, MRA expressed pessimism on prospects for Q4, forecasting the average growth rate at 3.8% on the back of cautious spending by consumers.

While department store-cumsupermarket operators expect their businesses to rebound moderately with a growth rate of 1.8% in Q4, department store operators expect their business to rebound strongly with 9.3% growth.

Meanwhile, supermarket and hypermarket operators do not expect their businesses to return to the black anytime soon given the forecast 1.2% drop in Q4 sales.

For 2018, RGM is projecting a 6% growth in retail sales and the recovery is highly dependent on factors such as the general election, external economic demand and the ringgit’s performance.