While luxury fashion is still associated with exclusivity, prestige and five-figure prices, the global sector is entering a period of structural transformation as consumer demand weakens and economic uncertainty reshapes spending behavior.
Major luxury retailers and fashion houses have begun to cut costs, reassess their store networks and shift investment toward more flexible operating models as shoppers become more selective in their discretionary spending.
In 2025, Kering closed 133 stores across its portfolio of brands and revealed plans to close another 100 locations. Ferragamo said it expects to close approximately 70 stores between 2025 and 2026, while Saks Global filed for Chapter 11 bankruptcy protection in 2026 and has continued to close retail locations across the country.
Industry analysts do not expect a quick recovery.
According to McKinsey & Company’s 2026 State of Fashion Report, the global fashion industry is projected to grow only in the low single digits in 2026, as macroeconomic volatility, tariff pressures and weaker consumer sentiment continue to weigh on demand, particularly in the US.
Now, another storied luxury brand is scaling back its retail presence while accelerating a broader turnaround effort.
Burberry, the 170-year-old British luxury fashion house, closed 21 stores and opened nine new locations during fiscal 2026, ending the year with 410 stores worldwide as of March 28, 2026, according to the company’s latest earnings report.
The retailer said it expects total store numbers to remain “broadly stable” in fiscal 2027 as it focuses on improving in-store experiences, increasing productivity and strengthening cross-category merchandising.
“We are exiting stores, which are in locations that are no longer appropriate or have profitability issues,” Burberry CEO Joshua Schulman said on the company’s 2026 earnings conference call. “When it’s a center that we just want to exit, we do it. But in other cases, we will find a more profitable alternative to display the product.”
The restructuring effort is already helping to improve profitability.
Burberry reported an adjusted operating profit of £160 million (approximately $213.26 million) for fiscal 2026. The company said its cost-reduction initiatives generated £80 million (approximately $106.63 million) in savings during the year and remain on track to generate £100 million (approximately $133.28 million) of annualized savings by 2027.
Executives also warned that geopolitical tensions and ongoing macroeconomic instability could continue to pressure consumer confidence in key luxury markets.
At the same time, Burberry has been investing more heavily in partnerships with wholesalers and department stores to strengthen brand visibility and improve sales performance without relying exclusively on directly operated locations.
The company said improved environments at retail stores, including Saks Global, Bloomingdale’s, Nordstrom and Galeries Lafayette, are generating stronger sales rates than some standalone Burberry locations.
The strategy reflects a broader shift occurring in retail, where brands are increasingly prioritizing operational efficiency, curated physical presence and omnichannel distribution over aggressive store expansion.
Burberry previously announced plans to reduce its global workforce by approximately 20% over a two-year period as part of a broader turnaround initiative focused on cutting costs, streamlining operations and reducing overproduction.
Early signs suggest Burberry’s recovery could be stabilizing
Despite continued pressure on the luxury retail sector, several indicators suggest that Burberry’s restructuring efforts may be starting to gain traction.
In its fiscal 2026 results, the company reported:
Revenue decreased almost 2% year over year
Comparable sales increased 2%
Sales growth was recorded in most regions except Asia Pacific
Cost of sales increased by 14%
Looking ahead to fiscal 2027, Burberry expects the impact of store reductions on revenue to remain broadly flat, while wholesale revenue is projected to grow in the mid-single digits during the first half of the year.
The weaker performance in the Asia Pacific region continues to be closely watched across the luxury industry, as brands continue to navigate slower consumer demand in China, one of the sector’s most important markets.
Luxury retail is shifting towards hybrid operating models
As traditional retailers reevaluate their physical footprint, e-commerce continues to capture a larger share of consumer spending.
According to Capital One Shopping, 84.3% of Americans now shop online. US e-commerce spending reached $1.34 trillion in 2024 and is projected to surpass $2.5 trillion in 2030.
Still, physical retail remains the dominant shopping channel globally.
EY research using data from Euromonitor found that brick-and-mortar stores accounted for about $14.4 trillion of the world’s $18.9 trillion in retail sales in 2025.
Industry experts say stores remain critical because they continue to drive profitability, brand visibility, fulfillment efficiency and customer engagement.
The challenge for many retailers is no longer deciding between physical and digital commerce. Instead, companies are increasingly forced to determine how stores fit into a broader ecosystem where convenience, personalization and operational efficiency matter more than the number of stores alone.
“In 2026, the luxury sector is poised to regain its luster, but only for brands willing to rethink fundamentals,” Interbrand global strategy director Manfredi Ricca told Advertising Week.
“The strategy reset is not about abandoning heritage or pursuing novelty for its own sake. It is about restoring balance: pricing that reflects true value, operations that reinforce integrity, and creativity that inspires and shapes culture,” Ricca added.
What Burberry’s restructuring reveals about the future of retail
Burberry’s restructuring highlights a broader transformation taking place across the retail industry as legacy brands adapt to slowing growth, rising operating costs and changing consumer expectations.
Many retailers are increasingly shifting toward more flexible, asset-light operating strategies that reduce reliance on expensive physical infrastructure while expanding digital capabilities, logistics, and partner-driven distribution models.
Similar restructuring efforts emerged at major brands over the past year. Below is some of my previous coverage on retail store closures:
According to Forrester, many retailers have struggled to modernize in-store experiences quickly enough to match the convenience, personalization and speed that 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 experimenting with hybrid strategies that integrate physical and digital shopping experiences, explained Sharmila C. Chatterjee, professor of marketing at MIT Sloan School of Management.
“The future of retail is a hybrid of online and offline channels,” Chatterjee said in a study. “To keep customers coming back, retailers must make strategic investments, experiment with new approaches and, inevitably, do trial and error as they figure it out.”
As luxury retailers navigate slowing demand and changing consumer behavior, companies like Burberry are increasingly treating stores less as stand-alone sales channels and more as strategic brand, fulfillment and customer experience assets within a larger retail ecosystem.
Related: Award-winning brewery in Chapter 11 bankruptcy faces sale
This story was originally published by TheStreet on May 17, 2026, where it first appeared in the Retail section. Add TheStreet as a preferred source by clicking here.
