What: European retail sector faces unprecedented transformation pressure with 17% of companies needing significant change and 6% requiring restructuring, putting USD 300 billion in GDP and 3.5 million jobs at risk.

Why it is important: This widespread need for transformation reflects deeper structural changes in consumer behaviour and market dynamics, with 54% of Europeans expressing economic pessimism and significant shifts towards digital channels, forcing retailers to fundamentally rethink their business models.

BCG's third annual Transform and Special Situations Index reveals significant pressures across the European retail landscape, with 17% of companies requiring transformation and 6% facing severe restructuring needs. This comprehensive analysis of 1,700 publicly held European companies identifies vulnerabilities that could impact more than USD 300 billion in GDP and 3.5 million jobs. Whilst inflation and interest rates show modest improvement across the continent, with bankruptcy rates stabilising at a 10% increase compared to the previous year's 28%, significant challenges persist. Germany emerges as the market facing the most elevated restructuring risk, whilst Italy and the Nordics experience heightened transformation pressure. The UK and France show signs of stabilisation, though sectoral challenges remain. The analysis emphasises the need for companies to implement strategic transformation levers, including strengthening revenue footprints, optimising supply chains, and leveraging innovation as a strategic engine to ensure long-term resilience in an evolving retail landscape.

IADS Notes:Recent market analyses from June 2025 confirm the report's findings, with the European retail sector reaching its highest distress level since 2009 . This aligns with observed consumer behaviour shifts, as 54% of Europeans express economic pessimism . The transformation is particularly evident in channel performance, with online fashion retail growing 14.6% whilst physical stores declined 2.7% in March 2025 . Department stores have shown resilience with 5.8% growth , demonstrating how different retail formats are adapting to these pressures through strategic transformation.

Europe Spending Momentum Index