KUALA LUMPUR, Dec 7 — Retail sales in Malaysia fell further than projected in the third quarter, due to increased Covid-19 cases nationwide and the restrictions imposed as a response.

According to a Retail Group of Malaysia (RGM) report, the sector contracted by -27.8 per cent year-on-year in the third quarter, or nearly twice as much as market observers had projected.

“This latest quarterly result was way below market expectation. Members of the Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) had projected the third quarter growth rate at -15.1 per cent in September 2021,” the group said in the report.

Retailers in Malaysia operated with strict social distancing measures under the recovery movement control order (RMCO) during the same quarter a year ago. On the other hand, most retailers were forced to halt or reduce operations during the first half of the third quarter period this year.

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The third quarter decline also far eclipsed the contraction from the earlier part of the year when a nationwide Emergency had been declared. In the first quarter of 2021, sales were down -9.9 per cent from the same period in the previous year.

Despite a second quarter recovery that saw sales grow 3.4 per cent, the industry was down -11.9 per cent for the first nine months of 2021 versus a year ago.

The report said that another critical period was from July 3 till July 16, when the enhanced movement control order (EMCO) had been enforced in most of Selangor and selected locations in Kuala Lumpur.

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From 16 August 2021, more retail businesses under National Recovery Plan (NRP) Phase 1 had been allowed to open. When the government relaxed restrictions on the number of passengers in a vehicle as well as the limit of travelling distance on 21 August 2021, shopping traffic in major shopping centres gradually returned.

According to the RGM, departmental store and supermarket sales dipped sharply with a growth rate of -41.9 per cent during the third quarter of 2021, likewise the retail sales of department stores' retail which contracted by -43.6 per cent during the same period.

Despite being allowed to open during the recent lockdowns, the supermarket and hypermarket sub-sector was still faced with declining retail sales with a negative growth rate of -12.5 per cent during the third quarter of 2021.

But on the other hand, mini-market, convenience stores and cooperatives enjoyed a small growth rate of 2.6 per cent in retail sales during the third quarter of this year. This is the best performing retail sub-sector during the quarter.

During the third quarter of 2021, the fashion and fashion accessories sub-sector registered the worst quarterly growth rate in terms of percentage. Its business declined by -63.6 per cent, while the children and baby products sub-sector suffered a drop in retail sales by -48.4 per cent.

Retailers in the fashion and fashion accessories sector expect their businesses to revive with a strong recovery of 50.4 per cent in growth rate during the fourth quarter of 2021, as compared to the same period a year ago. This retail sub-sector has the highest estimated growth rate for the next three months.

Retailers selling children and baby products, pharmacies, personal care and furniture and furnishing, home improvement as well as electrical and electronics sectors are expecting to pick up sales in the fourth quarter.

However, those in specialty stores sub-sector like photography, fitness equipment, second-hand goods as well as musical instruments are less optimistic, expecting their businesses to slide by -15.6 per cent during the next quarterly period.

The RGM first estimated a 0.8 per cent growth rate in retail sale for 2021 but are now revising their projection after taking into consideration the worse-than-expected growth during the third quarter as well as a revision of the fourth quarter estimate.

“RGM revises Malaysia's annual retail industry growth rate for 2021 from 0.8 per cent to 0.5 per cent.

“RGM expects the retail industry to gain momentum on its recovery by the end of this year. For the fourth quarter of 2021, the growth rate estimate has been revised upwards from 12.7 per cent estimated in September 2021 to 18.3 per cent.

Retailers are hopeful that retail sales will climb higher in December this year due to two upcoming major festivals- Christmas and Chinese New Year.