What: Global retailers face urgent pressure to redesign their store networks as extreme weather events cause unprecedented operational disruptions and financial losses totalling USD 320 billion in 2024.

Why it is important: The convergence of physical climate risks, insurance challenges, and regulatory pressures is forcing retailers to fundamentally rethink their store network strategies, marking a pivotal shift in how the fashion industry approaches physical retail planning.

Recent climate catastrophes, from Los Angeles wildfires to European floods, are compelling the fashion industry to reassess its approach to retail store networks. The unprecedented scale of these events, resulting in global losses of USD 320 billion in 2024, has exposed vulnerabilities in traditional retail strategies. While retailers have historically relied on insurance to manage climate risks, this safety net is showing signs of strain, with some insurers in California already withdrawing wildfire coverage and similar trends emerging in Europe. The fashion industry's sprawling retail footprint, often concentrated in major cities and tourist destinations, faces particular exposure to these risks. A new sector of weather risk analysts is emerging to help retailers map climate risks and adapt their strategies accordingly. The European Union's mandatory climate risk reporting requirements, coupled with similar proposals in the US, are adding regulatory pressure to this challenge. This convergence of factors is pushing retailers to consider not just immediate physical risks but also long-term viability of store locations and network design.

IADS Notes: Recent industry data strongly reinforces the article's concerns about climate impacts on retail operations. In May 2024, Visa reported a significant drop in consumer spending due to severe weather conditions, while July 2024 saw Hudson's Bay forced to close multiple Canadian locations during an unprecedented heat wave that overwhelmed store HVAC systems. These incidents align with the article's emphasis on increasing weather-related disruptions to retail operations. The industry's response has been evident in strategic adaptations, as demonstrated by major retailers like Macy's announcement in December 2024 to close 150 stores and Kohl's January 2025 decision to shutter 27 locations. These moves suggest that retailers are not only reacting to immediate climate threats but are also fundamentally rethinking their physical footprint to create more resilient and adaptable store networks.

Faced with extreme weather, should fashion rethink its store network?