RGM expects tough year for retail in 2018

PETALING JAYA: After a discouraging result for the latest quarter, which declined by 1.1% compared to the same period in 2016, Retail Group Malaysia (RGM) revised its annual growth forecast downwards again from 3.7% to 2.2% for Malaysia retail industry in 2017. This is the group’s third revision since the end of last year.

Based on this latest revision, RGM has also estimated the total sale turnover for Malaysia retail industry in 2017 to be at RM100bil.

“This year’s fourth quarter growth rate estimate has been revised from 5.5% to 4.5%, taking into consideration the growth of 0.3% achieved during the same period a year ago.

Retail Group Malaysia is more hopeful of the retail performance during the year-end festive period and school holiday as compared to Malaysian Retail Association (MRA) retailers who estimated growth to be at 3.8%,” according to a report released by the group.

RGM also projects a 6.0% growth rate in retail sale for next year. The association added that recovery of the Malaysian retail market next year is highly dependent on the election, external economic demand and ringgit performance.

For the third quarter of 2017, Malaysia retail industry reported another disappointing result. For this latest quarter, retail sale declined by 1.1% as compared to the same period in 2016.

Once again, this latest quarterly result did not meet market expectation. Members of MRA projected the third quarter growth rate in August 2017 at 2.9% while Retail Group Malaysia forecasted 4.0%.

After a short recovery during the second quarter of this year, retail sale slid into red again in the latest quarter.

“The retail industry failed to bounce back from the poor performance during the same period in 2016 (1.9% in third quarter of 2016).

“The early Hari Raya festival this year (in June 2017 as compared to July 2016) partly contributed to the lower retail sale,” the report said.

The report also indicated that despite strong economic performance during the third quarter, a majority of consumers did not receive higher take-home pays. The propensity to spend was not high as reflected in decline in Consumer Sentiment Index during the same period.

“Rising cost of living has also deteriorated the purchasing power of Malaysian consumers.

“For the first nine months of this year, the retail sale growth rate was 1.9%, as compared to the same period a year ago,” according to the report.

For the third quarter of 2017, Malaysia national economy recorded a stronger growth rate of 6.2% as compared to -1.1% for retail sales (at current prices). Exports and private investments registered the highest growth rates during this period.

“The average inflation rate during the third quarter of 2017 slowed down to 3.8%. The growth rates during July, August and September were 3.2%, 3.7% and 4.3% respectively. The top two increases were transportation as well as food & non-alcoholic beverages. The double-digit increase in monthly
transportation cost (11.7% in September) during the last two months was due mainly to higher fuel prices,” the report said.

On the rising food prices, cooking oil registered the highest increase (49% in September).
Private consumption continued to climb higher by 7.2% during the third quarter of 2017. Once again, Malaysian consumers are spending more on dining out, services and internet shopping.

After slight improvements during the last two quarters, the Consumer Sentiment Index (by MIER) retreated to 77.1 in the latest quarter. When their take-home pays did not improve, Malaysian consumers remained cautious in their monthly spending while struggling with a higher cost of living.

The unemployment rate during the third quarter of 2017 maintained at 3.4%.

Retail Sub-Sectors’ Sales Comparison
During the third quarter of 2017, all retail sub-sectors suffered a decline in sale except Pharmacy and Personal Care sub-sector and Other Specialty Retail Stores sub-sector.

After a short recovery, Department Store cum Supermarket sub-sector suffered a dip in sale during the third three months of this year with a growth of -3.5%.

After a strong rebound during the previous quarter, Department Store sub-sector slid into red with a growth rate of -4.4% during the third quarter.

“Despite selling necessities, the supermarket and hypermarket sub-sector reported the worst result during the latest quarter. For the third quarter of 2017, retail sale of this sub-sector dropped by 5.2%.

“Fashion and Fashion Accessories sub-sector did not fare well during the third quarter of 2017. As compared to the same period a year ago, fashion retailers suffered a negative growth of 4.8% during this latest quarter,” he said.

During the third quarter of this year, sale of pharmacy and personal care sub-sector recorded a sustainable growth rate of 6.0%, as compared to the same quarter a year ago. this is the best performer among the retail sub-sectors during the third quarter of 2017.

The other specialty stores sub-sector (including photoshops, toys store, fitness equipment store, second-hand goods & TV shopping channel as well as foods & beverages outlets) reported another encouraging growth rate of 5.9% during the third quarter of 2017, as compared to the same period last year.

Estimates for fourth quarter of 2017
Members of the retailers’ association are not optimistic on their businesses as they estimate an average growth rate of 3.8% during the fourth quarter of 2017.

The department store cum supermarket operators are expecting their businesses to rebound modestly with a growth rate of 1.8% during the last quarter of this year.

On the other hand, the department store operators look forward to their businesses to bounce back strongly with a growth rate of 9.3% for the last three-month period of this year.

The association added supermarket and hypermarket operators do not anticipate their businesses to return to black anytime soon.

“Their businesses will remain in the red with a -1.2% growth rate for the fourth quarter of 2017,” according to the report.

The business of retailers in the fashion and fashion accessories sub-sector is expected to recover well with a positive growth rate of 5.4% during the last quarter of 2017.

Retailers in the pharmacy and personal care sub-sector are expecting to maintain their growth at 7.1% during the fourth quarter of 2017.

Retailers in other specialty stores sub-sector (including photo shop, toys store, fitness equipment store, second-hand goods store, tv shopping channel as well as foods & beverages outlets) remain optimistic about their businesses in the coming months.

“For the last quarter of 2017, this sub-sector expects its business to expand by 7.3% as compared to the same period a year ago,” the report said.


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