This article first appeared in Capital, The Edge Malaysia Weekly on June 15, 2026 - June 21, 2026

MALAYSIAN consumers are becoming more selective with their spending as concerns about living costs, subsidy rationalisation and global economic uncertainty weigh on sentiment, benefiting retailers positioned on value and essential goods. This shift is increasingly visible in the most recent earnings results season, with discount and value-focused retailers outperforming peers exposed to discretionary spending.

Minimarket operator 99 Speed Mart Retail Holdings Bhd (KL:99SMART) reported a record quarterly profit for the three months ended March 31, 2026, with net profit rising 30.1% year on year (y-o-y) to RM188.6 million as revenue increased 17.5% to RM3.07 billion. The growth was driven by the addition of 253 stores and resilient demand for daily necessities.

Sales transactions rose 18% while the average basket size remained stable at RM21.70, suggesting that consumers continued to spend on essentials despite the weaker sentiment.

Household retailer Mr DIY Group (M) Bhd (KL:MRDIY) also posted solid results in 1Q2026, reporting revenue growth of 9.3%, a 12.3% increase in transactions and positive same-store-sales growth of 1.6%.

Analysts tell The Edge that consumers have not stopped spending. They are simply becoming more selective about where they spend, they say, pointing to a broader trend of downtrading to lower-cost alternatives.

99 Speed Mart’s share price closed 2.3% lower year to date at RM3.33 last Thursday, while that of MR DIY was 4.6% higher at RM1.60.

Note that MR DIY was relegated to the MSCI Malaysia Small Cap Index, together with QL Resources Bhd (KL:QL), in May while Nestlé (Malaysia) Bhd (KL:NESTLE) and Axiata Group Bhd (KL:AXIATA) were removed. Market observers say Mr DIY, being a household name, may remain on the radar screens of foreign funds, but only those that are keen on small-cap counters.

For context, the broader sector remains under pressure. Bursa Malaysia’s Consumer Products and Services Index, which stood at 564.31 points on Jan 27, a level not seen in more than 14 months, had since fallen to 485.57 points last Wednesday. Consumer stocks are now trading at an average price-earnings ratio (PER) of 18.88 times.

Analysts also point to Main Market-listed affordable household retailer Eco-Shop Marketing Bhd (KL:ECOSHOP), whose initial public offering (IPO) at RM1.13 per share in May last year raised RM974.22 million in gross proceeds, making it the largest flotation exercise since that of 99 Speed Mart, which raised RM2.36 billion in August 2024.

Having peaked at RM1.65 on Jan 26, the dollar store’s share price slumped 25% to RM1.24 last Wednesday, valuing the retailer at RM7.14 billion.

MBSB Research says recent earnings results indicated that consumers were seeking value rather than cutting spending altogether.

“Our view is that Malaysian consumers are trading down, but the impact is uneven. It is not a blanket shift where every cheap retailer wins. The clearest beneficiaries are names tied to essentials, value-for-money positioning and high-frequency purchases, while more discretionary categories are seeing either basket compression or margin pressure,” the research house observes, pointing to 99 Speedmart’s strong performance as evidence that household spending on staples remains healthy despite the weaker sentiment.

MBSB Research maintains its “buy” calls on 99 Speed Mart and Mr DIY, with a target price (TP) of RM4.37 and RM2.13 respectively.

With the growth numbers including food and beverages making up 74.4% of 99 Speed Mart’s revenue, the research house says this “suggests resilient staples-led spending and downtrading support”.

“Mr DIY also showed signs of benefiting, with revenue up 9.3%y-o-y, transactions up 12.3% y-o-y and same-store-sales growth (SSSG) improving to 1.6%, even though the basket size fell 2.6% y-o-y, suggesting that consumers are still buying but remain price-sensitive,” it adds.

The decline in basket size matters because it shows that consumers continue to visit stores and make purchases, but are controlling how much they spend on each visit. Kenanga Research analyst Thin Yun Jing says the trend is becoming evident across the retail sector.

“We think Malaysian consumers are becoming more selective in their spending decisions. While discretionary spending remains soft, consumers continue to spend on essentials and affordable purchases, with downtrading emerging as a more dominant trend than a complete pullback in consumption,” she tells The Edge.

“It is consistent with what we are seeing across the sector, including higher private-label adoption, resilient spending on essentials and smaller basket sizes across certain retail formats. In fact, two of the three retail names we cover reported a 2% to 3% y-o-y decline in basket size in FY2025, suggesting that consumers remain willing to spend but are increasingly focused on value rather than discretionary purchases,” she adds.

The trend also explains why analysts increasingly favour companies that can combine low prices with procurement scale.

RHB Research highlighted in a June 8 note that Mr DIY and Eco-Shop are among its preferred consumer stocks, arguing that both should benefit from value-seeking and downtrading behaviour if sentiment remains cautious. The research house added that out of the 17 stocks under its coverage, nine met expectations, seven disappointed and one surprised on the upside.

“We saw positive growth in revenue and net profit driven by the double festive seasons, the Lunar New Year and Aidilfitri. During the quarter, the only recommendation change was for QL Resources Bhd. We believe its valuation has depressed to attractive levels, in view of the anticipated resumption of earnings growth ahead,” it said.

To this end, Kenanga’s Thin expects these conditions to persist over the coming quarters.

“We expect affordability, convenience and perceived value to remain key consumer themes in the near term. Beyond looking for lower prices, consumers are becoming increasingly drawn in by promotions and more selective in their purchases. This should favour retailers with scale advantages, efficient sourcing and the ability to maintain affordable prices despite cost pressures,” she says.

The downtrading story becomes less straightforward outside the value segment as convenience store operators have not enjoyed the same tailwinds as discount retailers.

MBSB Research points out that even though chain stores such as myNEWS Holdings Bhd (KL:MYNEWS) and 7-Eleven Malaysia Holdings Bhd (KL:SEM) benefit from convenience and frequent purchases, they remain exposed to impulse spending categories, snacks, drinks and ready-to-eat products, which consumers can cut back on when budgets tighten.

“Convenience stores are not pure trade down beneficiaries. myNEWS and 7-Eleven sit in a more difficult middle ground,” the research house notes.

Kenanga’s Thin cites QL Resources’ FamilyMart as another player facing such a challenge.

“FamilyMart’s exposure is a good example. Its convenience store (CVS) revenue grew only 1.6% y-o-y in 4QFY2026, but growth was held back by lower average store sales amid soft consumer sentiment and food and beverage competition,” she says, emphasising that execution rather than consumer trade-down behaviour will be the key differentiator for convenience store operators.

“Based on recent FamilyMart trends, we believe product innovation and execution are currently more important drivers than downtrading behaviour, given the increasing competition in the broader food service segment,” she adds.

The retailers of discretionary goods are facing an even tougher backdrop. Consumer players such as apparel company Padini Holdings Bhd (KL:PADINI) and department store operator Aeon Co (M) Bhd (KL:AEON) could theoretically benefit as consumers trade down from more expensive alternatives. But unlike groceries and household essentials, fashion and general merchandise remain categories in which consumers can postpone purchases altogether.

“Padini is slightly different as it could also benefit on a relative basis as consumers seek more affordable fashion options instead of higher-priced brands, although overall apparel demand remains soft given the discretionary nature of the category. We also note that retail savings deposits grew faster than overall retail deposits in April, suggesting that households are becoming more prudent with their spending. Meanwhile, retail fixed deposits growth has moderated in recent months, potentially reflecting that consumers prefer to maintain liquidity amid ongoing uncertainties,” says Thin.

MBSB Research says the apparel company may “benefit from older or family-oriented consumers trading down from Uniqlo, H&M and other fast fashion brands, especially given its value positioning”. In fact, the apparel company’s latest quarterly results reflected the competing forces as “3QFY2026 revenue came in broadly flat at -0.4% y-o-y, while core earnings fell 12.5% y-o-y, despite festive support as discretionary spending and cost pressures remained challenging”.

If spending confidence recovers, MBSB Research believes that the beneficiaries will be Padini, AEON and café or F&B names. The research house lists AEON (“buy”, TP: RM1.47) as a beneficiary of improved mall footfall and discretionary spending, while its property management services segment provides earnings stability. Padini (“buy”, TP: RM2.13) may also gain from a recovery in apparel demand, especially given the depressed valuations.

Even F&B chain Oriental Kopi Holdings Bhd (KL:KOPI) (“buy”, TP: RM1.06) could see sustained revenue momentum helped by tourism demand.

“For now, though, I would position more defensively around value and staples, with 99 Speed Mart, Mr DIY, poultry and egg producer Leong Hup International Bhd (KL:LHI) and bottled water producer Life Water Bhd (KL:LWSABAH) as the preferred names,” says MBSB Research.

Notably, these companies are viewed as recovery plays rather than immediate beneficiaries of the current consumer environment.

At the premium end of the market, the spending shift is becoming more pronounced. Starbucks Malaysia, operated by Berjaya Food Bhd (KL:BJFOOD), has been experiencing declining sales as consumers gravitate towards lower-cost and trendier alternatives, according to analysts.

MBSB Research says the challenges extended beyond weaker discretionary spending.

“On BFood’s Starbucks Malaysia, it is not only [hampered by] weak discretionary spending. The brand is facing a combination of price sensitivity, evolving consumer preferences, local café competition and novelty-seeking behaviour,” says the analyst.

“Consumers seeking café experiences now have many localised, trendier and often better value alternatives, including kopitiam chains, independent cafés and local and Chinese coffee chains for convenience and value. Oriental Kopi is a good example of where demand is shifting [seeing that] its revenue grew 42.7% y-o-y, driven by café expansion and packaged food momentum.”

Malacca Securities head of research Loui Low Ley Yee believes that despite the intense competition for Starbucks Malaysia (BFood), Visit Malaysia 2026 may help offset the pressures of competition, and therefore potentially lead analysts to have a “neutral” call on the counter.

Should the tide shift and confidence recover, the analysts emphasise companies that offer value and essentials. “The best-positioned names, if sentiment remains weak, are 99 Speed Mart, Mr DIY, Leong Hup and Life Water,” says MBSB Research.

Conversely, should sentiment improve meaningfully, the more discretionary product retailers such as Padini could see a stronger earnings recovery as consumers become more willing to spend on non-essential items, says Kenanga’s Thin.

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