Retail sales momentum expected to pick up in 3Q

PETALING JAYA: Retailers are expecting sales to pick up in the third quarter of financial year 2026 (3Q26), with growth projected at 4.7% for the quarter, according to independent research firm Retail Group Malaysia (RGM).

The outlook comes after the retail industry recorded weaker-than-expected growth of 2.5% in 2Q26, well below the 4.8% growth previously projected by members of the Malaysia Retailers Association and Malaysia Retail Chain Association.

RGM said government cash aid programmes, including Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah, supported basic household spending in 2Q26, while the Budi95 petrol subsidy helped consumers manage their monthly expenses.

However, it said consumers remained cautious during the quarter, making fewer shopping trips, comparing prices before making purchases and favouring outlets offering discounts and vouchers.

RGM said consumers also shifted towards generic brands, lower-priced online purchases and local travel, while cutting back on discretionary services and activities such as haircuts, beauty treatments, car washes and car maintenance.

“They cut down on trips to movies and theatres. And they travelled locally instead of overseas,” RGM said.

Retail sales grew 3.1% year-on-year in the first half of financial year 2026, compared with 1.5% growth in the same period last year, after growing 3.7% in 1Q26.

Additionally, the 2Q saw broad-based weakness across the retail sector, with all subsectors contracting except fashion and fashion accessories, pharmacy, and personal care.

Fashion and fashion accessories was the strongest-performing subsector, growing 12.9%, while pharmacy and personal care grew 3.7% and 4.1%, respectively.

Supermarket and hypermarket sales fell 9% year-on-year in 2Q, while department store-cum-supermarket and department store sales declined 2.4% and 7.2%, respectively.

“After a short turnaround in the previous quarter, the furniture and furnishing, home improvement, and electrical and electronics sub-sector returned to the red zone with a negative 5.8% growth rate during 2Q26,” RGM said.

RGM said the retail sector’s performance remained weaker than the broader economy, which expanded 6% in 2Q, while private consumption grew 4.8%.

It also noted that average inflation rose to 1.9% during the quarter, while the unemployment rate returned to 3% and the labour force participation rate remained at a historical high of 70.9%.

Looking ahead, department store-cum-supermarket operators expect sales to grow marginally by 0.5% in 3Q26, while department store operators are expecting a turnaround with growth of 3.8%.

Supermarket and hypermarket operators, however, expect sales to remain in negative territory, with a contraction of 11.1% in 3Q26.

Fashion and fashion accessories retailers remain upbeat, expecting sales to strengthen by 17% in 3Q26.

Pharmacy operators expect sales growth of 4.1%, while personal care retailers are projecting growth of 3.8%.

Operators in the furniture and furnishing, home improvement, and electrical and electronics subsectors expect sales to expand moderately by 1.8%.

For the full year, RGM maintained its retail sales growth projection of 3.8% for 2026.