Malaysia’s retail sales may rebound after unexpected 0.2% drop in 4Q — RGM

• Broadly, however, shopping traffic in 4Q2023 was flat when compared to 4Q2022, RGM said

KUALA LUMPUR (March 11): Malaysia’s retail sales may rebound in the first quarter of 2024 (1Q2024), after unexpectedly shrinking 0.2% in 4Q2023, amid rising cost of living and fallout from the Israel-Hamas war, a consultancy firm said on Monday.

Retail sales are expected to grow an average 7.1% in 1Q2024 from a year earlier, with growth in all sub-sectors, partly due to festivities and school holidays, Retail Group Malaysia (RGM) said in a statement. RGM is forecasting 4% sales growth for the full year of 2024, following a 2.2% increase in 2023.

“For 2024, the biggest challenge for Malaysia's retail industry remains the rising cost of living of consumers,” RGM said. Still, government cash handouts may help to boost spending, while the “attractive” currency and visa-free entry for visitors from China may draw in a large number of tourists, it noted.

Members of the Malaysia Retailers Association and Malaysia Retail Chain Association had projected growth of 2.1% for 4Q2023, and a 2.8% increase for the full year.

Apart from higher cost of living, prolonged boycotts of many western brands with alleged or explicit support to Israel had dragged on certain retail brands. At the same time, Malaysians switched support to local and other Asian brands, RGM noted.

“Many Malaysian consumers are still avoiding these restaurants and cafes,” RGM said. “This boycott will remain in the medium term.”

Broadly, however, shopping traffic in 4Q2023 was flat when compared to 4Q2022, RGM said. While Malaysian consumers continued to spend, holiday sales were not the same as pre-Covid levels, due to the shortened school holiday, it said.

For 2024, higher food prices and higher operation costs will remain the struggles for food-and-beverage operators in Malaysia, RGM flagged. The weak ringgit is raising costs of raw materials and food ingredients.

“Despite the Chinese New Year festival and higher tourist activities, cafe and restaurant operators are anticipating their businesses to ease” 2.9% during 1Q2024, as compared to the same period last year, RGM said.

For 1Q2024, department store operators are hopeful of a 21.5% surge in sales after three consecutive quarters of contraction, RGM said, while retailers in the fashion and accessories sub-sector are targeting a strong recovery of 8.8% growth for the quarter.

Further, pharmacy operators are upbeat for a 9.4% rise in business, following a sharp slowdown in 4Q2023, while retailers in the personal care sub-sector are aiming for 15.5% growth in 1Q2024.

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