Retailers have experienced a major drop in sales with some registering a more than 40% decline over festive periods in the second half of the year, the Malaysian Employers’ Federation (MEF) said today.
MEF executive director Datuk Shamsuddin Bardan said retailers attribute the decline to the combined impact from the implementation of the goods and services tax (GST) in April and the ringgit’s depreciation against the US dollar. He added that consumers became more prudent in their spending after the GST came into effect and this was reflected in Hari Raya and Deepavali shopping in the second half of the year.
The cost of goods were “seemingly” higher because the tax and the exchange rate had also affected all players in the retail sector, both big and small companies, he added. “The challenges are very high for the retail sector. The sector has very much to do with domestic market outlook, especially when the rakyat is very careful with their spending and choosy with their purchases.
As such, the retail sector will be affected very much,” he told The Malaysian Insider. Poor consumer sentiment saw retailers grapple with a drop of more the 40% than the usual spending during the last two festive seasons in July and November.
“You look at Hari Raya and Deepavali. Many retailers are saying that their sales were affected, some by more than 40%. “In this kind of revenue outlook, this sector has no choice but to actually restructure their manpower and, unfortunately, when they talk about restructuring, they are talking about retrenchment.”
Shamsuddin said many retailers were struggling although MEF had yet to receive any reports on closures or retrenchments. The Edge Financial Daily last week reported that independent retail research firm, Retail Group Malaysia (RGM) has cut its forecast for retail sales this year for the fifth time, attributing it to poor figures in the second and third quarters of the year.
The firm said the decision to revise its forecast downward was due to the weakening ringgit in the past few months, which led to higher import costs. RGM, however, forecasted that the Q4 (October to December) growth to 3.8% year-on-year is higher than Malaysia Retailers Association’s (MRA) forecast of 1.3% growth for the same period.
This was because RGM believed that the higher cost of overseas travel would encourage domestic spending. MRA also said it did not expect its businesses to recover strongly for the period as they expected a 2.6% contraction in sales.