Retail industry sales to shrink 8.7% this year

  • Business
  • Monday, 13 Jul 2020

A Health ministry personnel arriving at a screening centre located at Section 3, Petaling Jaya. - May 10,2020. - SHAARI CHEMAT /The Star

KUALA LUMPUR: Retail Group Malaysia expects the country's retail industry sales to shrink by 8.7% this year which is worse than April’s forecast of a 5.5% decline as the sector was badly impacted by the measures to curb the spread of the Covid-19 pandemic.

It said on Monday members of Malaysia Retailers Association (MRA) had in a survey on their retail sales performances for the first half of 2020, described this year has been the worst period for retailers in Malaysia since 1987.

With the stringent curbs under the Movement Control Order (MCO) on March 18, the trade body said the retail market was severely impacted as retail sales fell.

For the first quarter of 2020, the retail industry recorded a fall of 11.4% in retail sales versus a year ago but the quarterly result was better than the estimate made by Retail Group Malaysia at -18.8% in April 2020.

The pandemic affected the retail performances of all retail sub-sectors during 1Q.

“The department store cum supermarket sub-sector recorded a negative growth rate of 8.5% during the first quarter of 2020, as compared to the same period a year ago.

“The food business of this sub-sector cushioned the negative impact of MCO in March 2020, ” it said.

Retail Group Malaysia said the Covid-19 pandemic, lower tourist arrival and MCO led to poor retail sale performance of department store sub-sector. The business of this sub-sector decreased by 17.5% in 1Q.

As for the supermarket and hypermarket sub-sector, it was the least affected retail sub-sector during this crisis. Its business declined by 3%.

However, the fashion and fashion accessories sub-sector recorded a plunge of 30.5% making it the worst performing retail sub-sector during this period.

The pharmacy and personal care sub-sector reported a decline of 3.9% on-year. Similar to the grocery retailers, it was one of the least affected retail sub-sectors during this quarter.

2Q forecast

As for the second quarter, members of the retailers’ association project an average decline of of 28.8%.

This is worse than the projection made by Retail Group Malaysia in April 2020 at -9.3%.

The department store cum supermarket operators are expecting a dismal performance with a decline of 40.9% in 2Q.

Retail Group Malaysia said the department store operators expect the worst in their businesses with a plunge of 62.8% in 2Q.

This sub-sector will be the worst performer among the retail sub-sectors during this quarter.

Supermarket and hypermarket operators will not see big improvement in their businesses in the coming months, the report said, expecting a decline of 14.8%.

Retail Group Malaysia said this sub-sector remains the least affected business among the retail sub-sectors during these trying times.

“Retailers in the fashion and fashion accessories sector expect their businesses to suffer a drop of 39.3% in growth rate during 2Q on-year.

“Retailers in the pharmacy and personal care sub-sector are expecting their businesses to record a decline of 18.4%

“Retailers in other specialty stores sub-sector (including retailers selling photographic equipment, optical products, children-related goods, second-hand goods, toys as well as arts & craft) are equally pessimistic. They expect their businesses to decline by 55.5% during 2Q, ” it said.

The MCO ended May 3 and was replaced with the Conditional MCO which ended on June 9.

During this period, most of the retail shops and shopping centres were allowed to open by adhering to standard operating procedures set by the government.

The Recovery Movement Control Order (RMCO) started on June 10 and it is expected to end on Aug 31. More services have been allowed to open for business. Inter-state travel among general public has been permitted as well.

Retail Group Malaysia said with strict social distancing measures continue to be enforced, retailers would not be able to operate at full capacity as last year.

For the third quarter of this year, retail sale is expected to suffer a moderate decline of 3.5% as compared to last year.

In the event MCO is lifted fully before October, Malaysian retailers should expect retail business to begin its recovery. For 4Q, retail sale is expected to decrease slightly by 1.5%.

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