Malaysia’s retail sales growth slowed to 2.5% year-on-year in the second quarter of 2026, falling short of Retail Group Malaysia’s (RGM) earlier forecast of 4.8%, as cautious consumers increasingly prioritised essential goods over discretionary purchases.
In its Sept 17 consumer sector report, CIMB Securities said weaker consumer sentiment, persistent cost-of-living pressures and uncertainty surrounding the Middle East conflict weighed on retail spending despite a favourable comparison with the corresponding quarter last year.
The earlier timing of Hari Raya celebrations in 2026 also contributed to a sharper moderation in spending following the festive period.
Retail performance was uneven across categories, with fashion and accessories recording the strongest growth at 12.9%, followed by personal care at 4.1% and pharmacy at 3.7%.
In contrast, supermarket and hypermarket sales contracted 9.0%, department store sales declined 7.2%, while furniture, home improvement and electrical and electronics-related retail sales fell 5.8%.
CIMB said the divergence reflected increasingly selective household spending, with consumers directing more of their budgets towards daily necessities.
Despite the weaker second-quarter performance, RGM maintained its 2026 retail sales growth forecast at 3.8%, projecting a recovery to 4.7% in the third quarter before growth moderates to 3.9% in the final quarter.
Malaysia’s retail industry recorded growth of 3.1% for the first half of 2026.
Affordability Remains Central To Consumer Spending
CIMB expects household expenditure to remain concentrated on food, daily essentials and value-for-money products throughout the second half of 2026.
The research house noted that 99 Speed Mart, Eco-Shop and MR DIY recorded higher revenue contributions from essential product categories, while AEON’s food-related sales strengthened in the first half.
These trends suggest that consumers are adjusting their spending patterns rather than abandoning retail purchases altogether.
CIMB expects government cash assistance and subsidy programmes to help cushion purchasing power, although it cautioned that further retail price increases could weigh on discretionary demand.
The research house maintained its NEUTRAL stance on the consumer sector, noting that earnings growth is likely to remain uneven as retailers contend with softer sentiment and persistent operating cost pressures.
The sector was trading at 26.9 times one-year forward earnings as at Sept 17, compared with its five-year average of 30.3 times.
CIMB identified QL Resources, Empire Premium Food, Life Water and Nestlé Malaysia among its preferred consumer stocks, maintaining BUY calls with target prices of RM4.60, RM1.36, RM1.77 and RM115 respectively.
It expects affordable, mass-market products and everyday essentials to remain the principal drivers of consumer spending for the remainder of 2026.
