KUALA LUMPUR (Sept 8): Retail Group Malaysia (RGM) has cut its Malaysian annual retail industry growth rate for 2023 to 2.7%, from the 4.8% growth forecast it made in June, due to poorer-than-expected growth rate of -4.0% in retail sales in the second quarter.

In the September Malaysia Retail Industry Report released on Friday, RGM said this latest quarterly result was way below the market expectation.

It said that in June 2023, members of Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) estimated an average growth rate of 2.6% for the second quarter of 2023.

RGM said the weaker-than-expected result was attributed to two main factors — lower sales during Hari Raya and high base effect.

RGM said although retail sales were encouraging, it was not comparable to a year ago.

It said Hari Raya a year ago was celebrated nationwide during the months of April and May.

RGM said this period encouraged Malaysians of all races to shop outdoors after two years of lockdown.

In 2022, shopping centres and main commercial centres throughout Malaysia started to attract a large shopping crowd three weeks before Hari Raya.

Shopping traffic in major shopping malls stayed at a high level even two weeks after the holiday.

RGM said that during the second quarter of 2022, retail sales expanded by 62.5%.

“It was one of the highest quarterly growth rate achieved in the history of Malaysia retail industry.

“Therefore, the negative growth rate in this quarter was partly due to the high base effect a year ago," it said.

For the first six months of this year, Malaysia's retail industry grew by 2.6%, as compared to the same period in 2022, said RGM.

The group said that after a remarkable recovery a year ago, many retail sub-sectors suffered from negative growth rates during the second quarter of 2023.

It said these latest quarterly results were way below market expectation.

The retail sales of the department store cum supermarket sub-sector dropped by 9.6% during the second quarter of 2023, as compared to the same period a year ago.

In addition, the retail business of the department store sub-sector shrank by 16.7% during the second three-month period of this year.

RGM said this was the worst performing sub-sector during the quarter.

In spite of Hari Raya, the sales of the supermarket and hypermarket sub-sector fell by 6.1% during the second quarter of 2023.

On the other hand, the mini-market, convenience store and cooperative sub-sector enjoyed a double-digit growth rate of 11.5% in retail sales during the second quarter of this year.

This was the best performing sub-sector during the quarter.

RGM said many members of the two retailers associations choose to stay conservative of their business prospects for the next three months.

It said they estimate an average growth rate of 1.4% in retail sales during the third quarter of 2023.

The low projection is also due to the high base effect a year ago.

During the third quarter of 2022, Malaysia retail industry had a historically high growth rate of 96%.

In June 2023, RGM estimated third quarter growth rate in retail sale at 3%.

Retailers are less optimistic on the spending power of Malaysian consumers during the current quarter.

RGM had revised downwards third quarter growth rate from 3% to 1.4%. This is a 53% drop from the earlier projection.

RGM said for the last quarter of 2023, the growth projection was maintained at 3% as compared to a year ago.

It said although shopping traffic has returned to pre-Covid levels, the spending power has been weakened in recent months. The Malaysian retail industry is still facing several major challenges for the rest of this year.

Although the monthly inflation rate has eased during the last few months, the price increments of many basic necessities and consumer goods are still higher than pre-lockdown.