Retailers set to hear tills ring louder

This article first appeared in The Edge Financial Daily, on March 15, 2018.
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KUALA LUMPUR: After a rollercoaster ride in 2017, traditional retailers are hopeful that their businesses will begin to recover this year.

Independent retail research firm Retail Group Malaysia (RGM) is estimating a 4.7% growth rate for the retail sector this year, which will ring in sales to the tune of RM104.4 billion from RM99.8 billion in 2017.

For the whole of 2017, retail sales grew 2% year-on-year (y-o-y). The retail industry performance last year lagged behind gross domestic product growth of 5.9%.

“At this moment, this [2018] projection is considered optimistic by Malaysia Retailers Association (MRA) members. The prospects for the retail industry this year are still highly dependent on the economic performance and consumer confidence level,” RGM said in its latest Malaysia Retail Industry Report (March 2018) released yesterday.

RGM pointed to the upcoming 14th general election (GE14) as one of the main reasons Malaysian consumers have been taking a wait-and-see attitude towards their retail spending.

“Retail sales may rise when the official election campaign starts. When the campaign begins, it will lead to many political and social activities throughout the country.

“This should motivate consumers to spend,” said RGM.

Post-election, the group sees consumer spending improving further as Malaysians will focus on their own economic future and release their pent-up demand.

Meanwhile, retail sales in the first quarter of 2018 (1Q18) are expected to rise 5.4% y-o-y due to the Chinese New Year period.

The department store cum supermarket operators, for one, are expecting their businesses to rebound strongly with a growth rate of 5.5% during 1Q18, said RGM.

“Similarly, the department store operators look forward to their businesses bouncing back strongly with a growth rate of 6.3% for the first three months of this year,” it added.

As for the supermarket and hypermarket operators, they are expecting their businesses to return to the black with a moderate growth rate of 2.4% in 1Q18 after a dismal performance in 2017.

According to the latest RGM data, the local retail industry fell short of market expectations to report a modest growth rate of 3.1% y-o-y in 4Q17. Year-end festival and school holidays contributed to the better growth rate during the quarter.

MRA members had projected the fourth-quarter growth rate to come in at 3.8%, while RGM had forecast a 4.5% growth rate.

During 4Q17, the supermarket and hypermarket sub-sector was the worst performer, with a growth of 2.3% y-o-y. For the entire 2017, it recorded a negative growth rate of 0.2%.

After a strong rebound during 2Q17, the department store sub-sector slid into the red again with a 0.4% contraction in 4Q17. For the whole year, however, it achieved a positive growth rate of 3.4%.

The supermarket and hypermarket sub-sector reported another poor result during the last quarter of 2017, with sales dropping by 2.7% y-o-y. For the whole 2017, its sales declined by 3.2%.