Retail Group Malaysia slashes growth target after sales slip

 

The independent retail research firm had on Thursday attributed the outlook due to the weak consumer sentiment due to a softening local currency and recent political development.

It now expects retail sales in the country to grow 3.1 per cent this year, instead of the earlier forecast of 4 per cent. It said this was the fourth time it had revised downwards its forecast for 2015.

“The current political development in our country is affecting retail sales indirectly. The recent political situation is affecting the consumer sentiment level and buying mood of Malaysian consumers. As a result, they are spending less,” Retail Group Malaysia said, adding that the weak ringgit was also affecting the costs of goods due to higher import costs. 

It noted that higher import costs were affecting all retail sectors, from grocery stores to restaurants, and fashion outlets as well as furniture and electrical and electronics stores. 

“Higher retail prices will be more apparent by the fourth quarter of this year. By then, Malaysian consumers' purchasing power will decline further,” Retail Group Malaysia pointed out.

Retail Group Malaysia downgraded its retail growth projection to 6 per cent for the last quarter of 2015, from the earlier estimate of 6.9 per cent. 

For the third quarter, Retail Group Malaysia expected the industry sales to grow 2.5 per cent. But members of Malaysia Retailers Association (MRA) were more pessimistic, expecting sales to grow only by 0.1 per cent for the three months to September 2015.

“Members of the retailers’ association do not expect their businesses to recover strongly from the negative impact of GST (goods and services tax) by the third quarter of 2015,” Retail Group Malaysia said. 

During the second quarter of 2015, the Malaysian retail industry saw sales plunge 11.9 per cent year-on-year (y-o-y) – the worst quarterly retail growth rate since the 1997/98 Asian financial crisis. 

The result was also way below the average forecast of 3 per cent growth by MRA members.

According to Retail Group Malaysia, the negative impact of GST on the national retail industry for the quarter in review was worse than anticipated.

“During the second quarter of 2015, consumers held back on their spending to observe the price movements of the retail goods and services. They were also waiting for more promotions by the retailers,” it explained.

It said that confusion such as that involving service charges for the food and beverage industry, telecommunications top-up cards, last minutes’ announcement of products to be exempt from tax, and sudden increase in taxi fares, also contributed to the drop in retail sales.

“Consumers were confused by the conflicting messages by the different government departments. They decided to delay their purchases,” Retail Group Malaysia said.