Malls, department stores and supermarkets still affected by the on-going pandemic

Retailers are estimating an average growth rate of -13.4 per cent in the first three months of this year due to the on-going Covid-19 pandemic and travel restrictions in almost all states of Malaysia.

The latest Malaysia Retail Sales Report released by Retail Group Malaysia (RGM) shows that the Movement Control Order (MCO) and Conditional MCO (CMCO) had affected almost all types of retail businesses during the first two months of this year.

RGM managing director Tan Hai Hsin said the department store-cum-supermarket operators, however, are hopeful of better performance during the first quarter of this year.

In the current quarter, the operators expect the business contraction to be smaller at -9.1 per cent, he said in the report.

Tan said the department store operators, on the other hand, are not anticipating a recovery anytime soon.

He said this retail sub-sector is expected to suffer from another double-digit negative growth rate of 47.4 per cent for the first three-month period of this year.

“Similarly, supermarket and hypermarket operators do not foresee their businesses returning to the black during the first quarter of 2021. They anticipate their businesses to record another negative growth of 14 per cent during this period,” he said.

The quarterly survey was compiled by RGM based on feedback from members of Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA).

Last year, the Malaysia retail industry recorded the worst performance since the Asian financial and economic crisis that took place 22 years ago.

In 1998, retail sales in Malaysia dropped by 20 per cent.

The findings show that for the fourth quarter of 2020 (Q42020), the Malaysia retail industry reported a discouraging growth rate of -19.7 per cent, as compared to the same period in 2019.

The Q42020 results did not meet the earlier projection by RGM in November 2020 at -18.2 per cent. The results were much lower than the average estimate made by MRA members (at -15.1 per cent) end of last year.

The second CMCO was implemented in Klang Valley (the largest retail market in Malaysia), from October 14, 2020. The CMCO was later extended to all states of Malaysia (except Sarawak) until the end of the year.

Tan said the third-wave covid-19 outbreak, restriction on interstate travel and inter-district travel, working from home and a delay in school opening led to the significant reduction in shopping traffic in malls, commercial centres, and foods & beverages outlets located throughout the country.

For the whole year of 2020, the retail sale growth rate was -16.3 per cent as compared to the same period a year ago.

Tan said during Q42020, the performances of almost all retail sub-sectors remained poor.

The business of department store-cum-supermarket sub-sector declined sharply during the last three months of 2020, with a negative growth rate of 26.8 per cent.

For the entire year, it recorded a weak performance of -18.7 per cent.

Tan said the department store sub-sector continued to suffer from reduced revenue during the last quarter. Its business deteriorated with a double-digit negative growth rate of 44.7 per cent during the fourth quarter.

For the whole year of 2020, the department store sub-sector achieved a growth rate of -38.3 per cent. It was the worst retail performer among the retail sub-sectors.

Tan said despite being able to open throughout the covid-19 pandemic, the supermarket and hypermarket sub-sector reported yet another poor result during the last quarter.

For Q42020, the retail sale of this sub-sector declined by 19.6 per cent. For the whole year, its sale dropped by 12 per cent.

The mini-market, convenience store, and cooperative sub-sector were least affected as compared to many other retail sub-sectors. For the last quarter of 2020, it grew by 10.2 per cent, while for the entire year, its business expanded by 14.8 per cent.

Tan said RGM has revised its growth rate projection downwards from 4.9 per cent to 4.1 per cent for the whole of 2021.

This latest revision is also based on other factors of consideration, he added.

“More retail businesses will be allowed to open from March 2021. Nevertheless, movement restrictions continue to affect shopping traffic throughout the country,” RGM said.

RGM also said the interstate travel ban is expected to be enforced for a longer period of time and it has been affecting domestic tourism spending.

“The return of foreign tourists will be slow and gradual. Travel bubbles with selected countries will likely begin towards the end of this year. Vaccination on a majority of the population will take a while. Thus, movement restrictions and social distancing measures will remain until the end of this year,” it said.

Tan believes that consumers’ spending is not expected to recover back to the 2019 level.

Source: NST