While luxury fashion is still associated with exclusivity, prestige, and five-figure price tags, the global sector is entering a period of structural change as consumer demand weakens and economic uncertainty reshapes spending patterns.
Luxury department stores and fashion houses have begun to cut costs, reevaluate their store networks, and shift investments to more flexible operating models as consumers become more selective in their spending choices.
By 2025, Kering has closed 133 stores across its product portfolio, and disclosed plans to close another 100 locations. Ferragamo said it expects to close about 70 stores between 2025 and 2026, while Saks Global filed for Chapter 11 bankruptcy protection in 2026 and continues to close stores nationwide.
Industry analysts do not expect a quick recovery.
According to the McKinsey & Company State of Fashion 2026 Report, the global fashion industry is expected to grow in low numbers only in 2026 as macroeconomic instability, tax pressures, and weak consumer sentiment continue to dampen demand, especially in the US.
Now, another historic brand is reducing its retail footprint while accelerating a broader turnaround effort.
Burberry is closing stores around the world amid restructuring
Burberry, the 170-year-old British luxury house, closed 21 stores while opening nine new locations during fiscal 2026, ending the year with 410 stores worldwide as of March 28, 2026, according to its latest earnings report.
The retailer said it expects its total store count to remain “broadly stable” in fiscal 2027 as it focuses on improving the in-store experience, increasing product, and strengthening cross-category sales.
“We’re getting out of stores, which may be in areas that are no longer suitable or have profitability challenges,” Burberry CEO Joshua Schulman said on the company’s 2026 earnings call. “If it’s a middle ground where we want to go out, we’ll go out. But in some cases, we’ll find another more profitable way to show the product.”
The restructuring effort is already contributing to improved profitability.
Burberry reported an adjusted operating profit of £160 million (about $213.26 million) for fiscal 2026. The company said its cost-cutting efforts resulted in £80 million (about $106.63 million) in savings during the year and is on track to deliver £100 million (about $203 million a year) in savings for the year 20.28
Executives also warned that regional tensions and continued macroeconomic instability could continue to weigh on consumer confidence in all major luxury markets.
At the same time, Burberry has been investing heavily in department store and department store partnerships to strengthen brand visibility and improve sales performance without relying exclusively on direct operations.
The company said the improved locations in the stores, including Saks Global, Bloomingdale’s, Nordstrom, and Galeries Lafayette, are generating stronger sales figures than Burberry’s other standalone locations.
The strategy reflects a broader shift underway across stores, where brands are increasingly prioritizing efficiency, select physical presence, and omnichannel distribution over aggressive store expansion.
Burberry previously announced plans to reduce its global workforce by nearly 20% over a two-year period as part of a broader restructuring program focused on cutting costs, streamlining operations, and reducing overproduction.
Early signs indicate that Burberry’s turnaround may be sustainable
Despite continued pressure across the luxury retail sector, several indicators suggest that Burberry’s restructuring efforts may be starting to pay off.
In its results for the 2026 financial year, the company reported:
-
Revenue was down about 2% year-over-year
-
Comparable sales up 2%
-
Sales growth was recorded in most regions, except Asia Pacific
-
Cost of sales up 14%
Looking ahead to fiscal 2027, Burberry expects the impact of store cuts on revenue to remain stable while net income is estimated to grow in the mid-single digits during the first half of the year.
Weak performance in the Asia Pacific region remains a closely-watched event across the luxury industry as brands continue to navigate sluggish consumer demand in China, one of the industry’s most important markets.
Luxury sales are shifting to hybrid performance models
As traditional retailers reevaluate their physical footprint, e-commerce continues to capture a large portion of consumer spending.
According to Capital One Shopping, 84.3% of Americans now shop online. US e-commerce spending reached $1.34 trillion by 2024 and is expected to exceed $2.5 trillion by 2030.
Nevertheless, physical retail is still the leading shopping channel worldwide.
A study from EY using data from Euromonitor found that brick and mortar stores will account for $14.4 billion of the $18.9 billion in global retail sales by 2025.
Industry experts say stores are still important because they continue to drive profitability, product visibility, efficiency, and customer engagement.
“It’s clear that the physical store still plays an important role,” said EY Global Retail Leader Malin Andrée and Senior Consumer Analyst Jon Copestake. “Not only do stores have more revenue streams left, but they also have opportunities to develop new growth and other revenue streams and, by working in partnership with digital channels, can increase return on investment.”
The challenge for many retailers is no longer deciding between digital and physical commerce. Instead, companies are increasingly forced to decide how stores fit into a broader ecosystem where convenience, personalization, and efficiency are more important than individual store counts.
“In 2026, the luxury industry is ready to shine again, but only companies are willing to rethink the basics,” said Interbrand Global Chief Strategy Officer Manfredi Ricca in Advertising Week.
“Resetting strategy isn’t about discarding values or chasing innovation for its own sake. It’s about restoring balance: prices that reflect real value, activities that reinforce integrity, and creativity that inspires and shapes culture,” added Ricca.
What Burberry’s restructuring reveals about the future of retail
Burberry’s restructuring highlights broader changes taking place across the retail industry as legacy brands adjust to slower growth, rising operating costs, and changing consumer expectations.
Many retailers are increasingly shifting to flexible, inventory-light operating strategies that reduce reliance on expensive physical infrastructure while expanding digital capabilities, logistics, and partner-driven distribution models.
Similar restructuring efforts have appeared at every major brand in the past year. Here are some of my previous coverage of store closures:
According to Forrester, many retailers have struggled to modernize in-store quickly enough to keep up with the convenience, personalization, and speed customers now expect online.
Retail analysts say long-term success will likely depend on balancing operational efficiency with innovation and customer experience.
Retailers should continue to explore hybrid strategies that combine digital and physical shopping experiences, explains Sharmila C. Chatterjee, a marketing professor at the MIT Sloan School of Management.
“The future of retail is a mix of online and offline channels,” Chatterjee said in the study. “To keep customers coming back, retailers need to make significant investments, test new methods, and, of course, engage in some trial and error as they see fit.”
As luxury retailers navigate declining demand and changing consumer behavior, companies like Burberry are increasingly treating stores as independent sales channels and as strategic product, fulfillment, and customer experience assets within the larger retail ecosystem.
Related: Award-winning brewery in Chapter 11 bankruptcy faces auction
This story was originally published by TheStreet on May 17, 2026, where it appeared first in the Marketing section. Add TheStreet as a favorite source by clicking here.
