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Still no light at the end of the retail tunnel

KUALA LUMPUR (Dec 2): For the third quarter of 2020 (3Q20), the Malaysian retail industry recorded a poorer-than-expected growth rate of -9.7%, compared to the same period in 2019.

The latest quarterly results were way below market expectations.

Members of the Malaysia Retailers Association (MRA) had projected the 3Q20 growth rate at -3.4% (estimated in September).

The latest results were 185% worse than the earlier estimate.

In the November 2020 Malaysia Retail Industry Report compiled and written by Retail Group Malaysia (RGM), it said the third-wave Covid-19 pandemic and the second conditional movement control order (CMCO) had dampened the spirit of Malaysian retailers, adding that there was still no light at the end of the retail tunnel.

It said with strict social distancing measures enforced during the entire 3Q20, shopping centres and retailers were not be able to operate at full capacity, compared to the pre-Covid-19 period.

RGM said although almost all retail sectors were allowed to open for business in 3Q20, Malaysian consumers were still wary of the spread of the virus.

“They travelled to retail shops for basic necessities and chose not to shop around.

“Reduced take-home pay during the period also limited the purchasing power of Malaysian consumers,” it said.

RGM said for the first nine months of this year (9M20), the retail sales growth rate was -18.4%, compared to the same period a year ago.

It said for 3Q20, the Malaysian economy reported a smaller contraction of 2.7%, compared to -9.7% for retail sales.

The economy turned around after almost all economic sectors resumed operations, it said.

RGM said all retail sub-sectors, except for other specialty retail stores, reported another quarter of declining sales in 3Q20.

It said the department store cum supermarket sub-sector recorded a negative growth rate of 6.2% for 3Q20.

The department store sub-sector reported another set of disappointing results with a growth rate of -17.7% in 3Q20.

It was the worst performing retail sub-sector for the quarter, RGM said.

RGM said for 3Q20, retail sales of the supermarket and hypermarket sub-sector dropped by 15.1%.

The latest results were worse than the first two quarters of the year, it said.

Meanwhile, the growth rate of the fashion and fashion accessories sub-sector slowed down by 12.5% in 3Q20.

For the quarter, the pharmacy and personal care sub-sector recorded another negative growth rate, at -11.1%, compared to the same quarter a year ago.

RGM said going forward, members of the association are still pessimistic about their businesses in the next three months.

They estimated an average growth rate of -15.1% for 4Q20, RGM said.

On the remainder of the year, RGM said it had revised its retail growth rate estimate downwards from -2.5% (estimated in September) to -18.2%.

This is lower than the estimate calculated by MRA members (of -15.1%) due to the prolonged second CMCO, RGM said.

“Taking into consideration the poor performance recorded for the third quarter as well as the much lower growth estimate for the fourth quarter, RGM revises its annual growth forecast downwards from -9.3% (estimated in September) to -15.8% for Malaysia's retail industry in 2020,” it said.

Commenting on the 2021 outlook, RGM projected a 4.9% growth rate for retail sales in 2021.

It said the coming new year will remain a great challenge to the Malaysian retail industry.

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