What: European retail sector hits highest distress level since 2009, overtaking industrials and real estate, driven by weak consumer spending and tightening credit conditions.

Why it is important: This development marks a critical turning point for European retail, as the combination of financial pressure and changing consumer patterns forces a comprehensive reassessment of traditional retail operations.

The European retail sector is experiencing unprecedented levels of distress, surpassing both industrial and real estate sectors in financial vulnerability. This deterioration, reaching its highest point since the 2009 global financial crisis, stems from a combination of weak discretionary spending, margin compression, and tightening credit conditions. The impact is particularly pronounced in Germany, which remains the most distressed market in the region. According to Weil, Gotshal & Manges' European Distress Index, corporate distress across Europe has climbed to its highest level in nine months, with seven out of ten industry groups showing worsening conditions compared to the previous quarter. The retail sector's rapid decline is further exacerbated by ongoing uncertainty around tariffs affecting supply chains and exports to the US. This comprehensive challenge to the retail sector reflects broader economic uncertainties, including geopolitical tensions, conflicts in the Middle East and Ukraine, and volatile financial markets.

IADS Notes: Recent market analyses reveal an accelerating pattern of retail sector distress across Europe. In June 2025, BCG's survey highlighted deteriorating consumer confidence, with 54% of Europeans expressing economic pessimism and 73% experiencing higher prices, directly impacting discretionary spending. This consumer sentiment decline has triggered a wave of retail restructuring, exemplified by C&A's March 2025 closure of 24 stores in France and elimination of 324 jobs. The sector's challenges are further illustrated by Coin Group's December 2024 comprehensive restructuring affecting 1,331 workers and eight stores while addressing €80 million in debt. The trend extends to property assets, as seen in April 2025 with Nama's Zagreb department store entering a structured auction process, demonstrating how retailers are implementing increasingly sophisticated approaches to restructuring that balance financial necessity with operational continuity.

Retail emerges as most sistressed Sector in Europe