Retail industry records slower growth in Q3, department stores disappoint

KUALA LUMPUR: Malaysia's retail industry recorded a dismal growth of 1.9% in the the third quarter ended Sept 30, 2016 from a year ago as the department store sub-sector reporting disappointing sales.

The Retail Group Malaysia (RGM) said on Friday 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 though than a year ago when it expanded 1.6%.

In its retail industry report, it said 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 the members of Malaysia Retailers Association (MRA) on their retail performance.

“The Hari Raya festival in early July did not lead to higher retail sales. Higher minimum wahes from July 1, 2016 also did not bring cheer to retailers as well,” it said.

RGM said Malaysian consumers had also 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 Q3, 2016 from a year ago, impacted by the slowdown in the department store sales.

“The department store sub-sector was the worst performing retail sub-sector during this latest quarter (Q3, 2016). Its sales declined by 6.3% on-year,” it said.

As for the supermarket and hypermarket sub-sector, it 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 of 2016 form a year ago.

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 Malaysia Retailers Association (MRA) estimate 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 is expected to moderate to 5.9%.

The report also pointed out that other retail sub-sectors including photo shops, sporting goods stores, optical shops, children-related stores as well are restaurants are “optimistics their businesses will return to the black in the coming months.

“For the last three months of 2016, this sub-sector expects its business to expand by 4.9% from a year ago,” it said.

For the entire 2016, RGM has revised downwards the Malaysian retail industry’s sales growth rate from 3.5% to 3% or RM99.1bil in retail sale values.This was on the back of the poor performance of retail sales during the third quarter of this year.