Recovery in retail sales seen only in second half of 2017
PETALING JAYA: Next year will remain a challenging year for Malaysian retailers with a significant recovery in retail sales only expected during the second half of 2017, according to the Retail Group Malaysia (RGM).
As the economy is not expected to recover strongly in the immediate term, Malaysian consumers are expected to hold back on their spending during the first half of next year, it said. The cost of living of the average Malaysian will continue to rise in 2017.
“The continued weakening of the ringgit will impact the costs of retail goods. Retailers may be forced to raise prices again during the first six months of next year,” the group said in a statement.
For 2017, it forecasts a 5% growth in retail sales. In its retail industry report, the group said Malaysia’s retail industry recorded a dismal growth of 1.9% in the third quarter ended Sept 30, 2016, from a year ago as the department store sub-sector reported disappointing sales.
It added that the result for the July-September 2016 quarter was 68% lower than market expectations of its members in August 2016 at 5.9%.
However, it was slightly better than a year ago when it expanded 1.6%.
It noted that there was a deceleration in the growth after it bounced back from a -4.4% decline in January-March to expand 7.5% in April to June.
The findings were based on RGM’s survey of members of Malaysia Retailers Association (MRA) on their retail performance for the rest of the year.
“The Hari Raya festival in early July did not lead to higher retail sales. Higher minimum wages from July 1, 2016 also did not bring cheer to retailers as well,” it said.
RGM said Malaysian consumers had yet to recover from the negative impact of the goods and services tax (GST) which came into effect on April 1, 2015.
It also pointed out that from January to September 2016, retail sales grew 1.6%.
As for the department store cum supermarket sub-sector, it recorded a 1.5% decline in the third quarter from a year ago, impacted by the slowdown in department store sales.
“The department store sub-sector was the worst performing retail sub-sector during the third quarter. Its sales declined by 6.3% on-year,” it said.
Meanwhile the supermarket and hypermarket sub-sector grew at a slower pace of 0.7%. The fashion and fashion accessories sub-sector managed to sustain its business with a growth rate of 7.6% during the third quarter.
In contrast, the pharmacy and personal care sub-sector enjoyed a strong growth rate of 10.2% in the third quarter from a year ago. It was the best performing retail sub-sector during this quarter.
For the fourth quarter of 2016, the members of MRA estimated an average growth rate of 5.5% on expectations of a rebound in the department store cum supermarket operators.
The department store operators forecast a growth rate of 5.4% in the fourth quarter, while the supermarket and hypermarket operators expect a growth of 4.3%. The pharmacy and personal care sub-sector’s sales are expected to moderate to 5.9%.
For the entire 2016, RGM has revised downwards the retail industry’s sales growth rate from 3.5% to 3% or to RM99.1bil in retail sale value. Notably this is the second revision for 2016 on the retail sales growth rate due to the poor performance of sales during the third quarter.