Friday 29 Mar 2024
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KUALA LUMPUR (March 17): With an estimated shopping traffic decline of up to 50% in certain shopping centres as the Covid-19 outbreak persists, Malaysia's retail industry is expected to post a 3.9% year-on-year contraction for the first quarter of 2020 (1Q2020), according to Retail Group Malaysia (RGM).

The independent retail research firm also cancelled its earlier 4.9% projected growth for the industry this year — a projection it made in end-2019 — and said it is now unclear as to how the industry will perform for the entire year.

"End of 2019, Retail Group Malaysia projected 4.6% growth rate in Malaysia retail industry for 2020. However, this projection is no longer valid due to the unexpected developments in the first three months of this year. Covid-19 and the change of ruling government party have both affected retail spending in the country.

"RGM is unable to establish the likely retail industry growth rate for 2020 at the time of preparing this report. This is because of the ongoing and unpredictable changes relating to the Covid-19 outbreak and the new ruling government policies," RGM said in its report to members of the Malaysia Retail Association or MRA, today.

But in the event the coronavirus outbreak and domestic political turmoil takes more than the next few months to resolve, the local retail industry could suffer a contraction for the entire year, it warned. "The previous year when Malaysia retail industry recorded a negative growth rate was 1998 — the first year of Asian financial and economic crisis. In 1998, the market size of Malaysia retail industry contracted by 20%," it noted.

As to its 3.9% contraction predicted for 1Q2020, it is worse than MRA members' expectation of a 0.4% growth. The MRA's estimates, however, were made in end-January and early-February, before the global spread of novel coronavirus, it said.

Year-end festive seasons lift 4Q2019's retail growth by 3.8%
In the final quarter of 2019 (4Q2019), Malaysia's retail sales grew 3.8% y-o-y, as expected by RGM and better than MRA members' 2.7% projection — thanks to the year-end festivals, school holidays and aggressive promotions undertaken by retailers. In contrast, 4Q2018 recorded a 2.7% growth rate.

This brings the full 2019 retail sales growth to 3.7%, compared with 2018’s 3.9%.

The pharmacy and personal care sub-sector was the best performer during the quarter under review, with an 8.8% growth. This sub-sector expanded by 9.8% for the entire 2019.

Another sub-sector that reported a strong growth rate was specialty stores (including photo shops, second-hand goods' stores, fitness equipment stores, toys shops, optical stores, children-related stores as well as TV shopping channels), which grew 6.3% in 4Q2019 and 6.5% for 2019. The department store cum supermarket sub-sector also registered a strong growth rate of 7.6% in 4Q2019, with a full-year growth of 5.5%.

But operators of department stores recorded a 0.3% contraction in 4Q2019, with the sub-sector's full 2019 growth coming in at only 0.6%. As for the fashion and fashion accessories sub-sector, which reported a growth rate of 3.5% during 4Q2019, its full 2019 growth came in at 1.8%.

The supermarket and hypermarket sub-sector, meanwhile, was the worst performer during the quarter, with a 3.4% contraction. The sub-sector's sales dropped 2.8% for the full 2019.

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