Retail sales headed for double-digit declines by end-Q1

Sales might contract of 5% for the whole year.

Singapore retailers face a bleak horizon in the near-term, as retail sales are expected to continue to deteriorate in the coming months and even possibly hit double-digit declines by the end of March, according to analysts.

January’s contraction of 5.3% YoY meant that retail sales in Singapore have now posted 12 consecutive months of contractions, noted OCBC Treasury Research head of research and strategy Selena Ling.

“We estimate that retail sales may remain in the red until at least August 2020, which could possibly result in a total consecutive contraction streak of 18 months – beating the 16 months losing run set in 2009,” said Ling, adding that retailers will continue to face pressure as long as the COVID-19 outbreak poses as a material headwind to the global economy.

Also read: Retail sales down 5.3% to $4.1b in January

Not even the Lunar New Year celebrations in February would be able to save retailers, noted UOB Global Economics & Markets Research economist Barnabas Gan in a separate report.

“Seasonal boosts to retail sales given LNY festive will dissipate into February and March 2020, reinforcing the scenario that retail sales will almost certainly fall as tourism arrivals and consumer spending plummet in the first quarter,” he noted.

Coupled with a slowing economy, Gan expects retail sales to see a full-year contraction of 5% in 2020.

February’s retail sales figures are expected to be worse than its preceding month, impacted by the travel ban from China as well as the reported lower footfall on shopping malls and restaurants.

Also read: 60% of F&B businesses are not prepared for COVID-19

“Anecdotal evidence also suggests that footfall at Changi Airport Jewel, Orchard shopping area, restaurants and recreation/entertainment took a big hit in February,” added OCBC’s Ling.

However, retailers that are not readily substitutable by cross-border online sales continued to climb in January 2020, noted UOB’s Gan. These sectors included luxury goods such as watches & jewellery at 5.7% YoY climb, marking four straight months of expansion; petrol service stations with a 3.6% YoY rise; and medical goods & toiletries, which edged up 1.6% YoY. 

Photo courtesy of Wikimedia Commons.