PETALING JAYA: Mass-market and staples-oriented consumer players are expected to outperform more discretionary names this year amid still-cautious sentiment.
In a note, CIMB Research said that affordability is likely to remain the dominant consumer theme in 2026.
“In the consumer space, we continue to steer investors towards defensive, mass-market names that are best positioned to capture downtrading and sustain demand.
“At the subsector level, we expect staples-heavy large caps to remain supported by resilient underlying consumption and ongoing government assistance.
“Discretionary names are likely to face a more muted backdrop, given softer demand visibility alongside persistent margin headwinds from elevated operating costs and a still-competitive promotional environment,” CIMB Research said.
The research house still maintains its “neutral” call on the consumer sector, and continues to prefer essential goods and downtrading beneficiaries.
It added that the sector is currently trading at 28.1 times forward price-to-earnings ratio, slightly below the five-year average of 31 times.
“In our view, this appropriately reflects softer consumer sentiment, more muted earnings momentum, and persistent cost pressures (most acute among discretionary retailers).
“That said, sector valuations remain underpinned by large-cap staples, given inelastic demand for essential goods, continued government support (cash handouts), spillover from minimum wage increases, and the introduction of the Employees Provident Fund’s Account 3.”
An analyst told StarBiz that while economic growth in 2025 surpassed expectations, the momentum may ease this year and this would be reflected in consumption patterns.
“People will still go out and spend, but they are likely to balance cost and quality.
“Consumer players that can deliver products and services at acceptable prices and quality will perform better this year,” the analyst said.
In the fourth quarter of 2025 (4Q25), CIMB Research highlighted that 10 consumer names met results expectations while five fell short, with all misses coming from retailers amid softer discretionary demand and higher operating cost pressure.
There were no earnings beats, while five names underperformed, namely, Amway (Malaysia) Holdings Bhd, Padini Holdings Bhd
, Bonia Corp Bhd, 7-Eleven Malaysia Holdings Bhd and Yoong Onn Corp Bhd.
The misses were largely driven by a combination of softer sales demand, higher operating cost pressure – including the 8% sales and service tax on leasing services, employee-related costs, and utilities – weaker operating leverage, and a less-favourable sales mix.
On a cumulative basis for 4Q25, CIMB Research said consumer staples names under its coverage delivered revenue growth of 8.5% year-on-year (y-o-y), with core net profit up 14.2% y-o-y.
Nestle (M) Bhd, Farm Fresh Bhd, 99 Speed Mart Retail Holdings Bhd and Life Water Bhd were the key outperformers.
In 4Q25, consumer discretionary names under its coverage recorded revenue growth (3.1% y-o-y) but slightly weaker core net profit (0.5% y-o-y decline), implying margin compression.
Top-line growth was largely driven by stronger sales at selected retailers on positive same store-sales growth and continued store additions.
This was partially offset by the later timing of Chinese New Year in 1Q26.
Sequentially, the subsector delivered a clear festive-driven rebound, with 4Q25 revenue up 6.9% quarter-on-quarter (q-o-q) and core net profit up 41.2% q-o-q, supported by year-end festive demand.
