KUALA LUMPUR (June 18): Malaysian retailers expect sales to grow at a slower pace ahead amid rising prices, an industry research firm said on Wednesday following a weak turnout in recent months.

Retail sales grew 5.6% in the first three months of 2025 when compared to the same quarter last year, Retail Group Malaysia (RGM) said in its industry report. That was weaker than the 5.9% growth predicted earlier, and sales may drop 1% in the next quarter after the end of holiday shopping, it said.

Malaysians have been struggling with higher retail prices on goods and services from groceries to car parks since the beginning of this year, and businesses are likely to pass on the cost of higher operating costs to consumers, the independent retail research firm said.

Retail sales in the first quarter (1Q) was led by a 12% surge in the fashion and fashion accessories subsector amid a shopping spree driven by twin festivals and school holidays, followed by mini-market, convenience store and cooperatives.

While inflation has remained manageable, consumers are bracing for rising cost of living from potential policy measures later this year, including subsidy rationalisation for widely used RON95 petrol and an increase in electricity tariffs.

In the second quarter, a decline of nearly 11% at department stores is expected to weigh on the retail sector, followed by supermarket-and-hypermarket segment projecting a 9.5% contraction in sales.

For the whole of 2025, RGM is forecasting retail sales to grow 3.1%, lower than the previously projected rate of 4.3%.

The food-and-beverage sector meanwhile enjoyed stronger than expected growth in 1Q and operators of cafes and restaurants are “upbeat that their business will retain its growth momentum for the next quarter,” RGM said.

The situation at several international food franchises however remained bleak from ongoing boycotts due to the ongoing Israel-Palestine conflicts and competition from new entrants, which led to heavy losses of several brands operating in Malaysia, the research firm noted.

“Some outlets remained closed down temporarily, while numerous underperforming outlets were shut down permanently,” RGM added.