While luxury fashion is still associated with exclusivity, prestige, and five-figure price tags, 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 reducing costs, reevaluating their store networks, and shifting 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 disclosed plans to shutter another 100 locations. Ferragamo said it expects to shutter roughly 70 stores between 2025 and 2026, while Saks Global filed for Chapter 11 bankruptcy protection in 2026 and has continued closing retail locations nationwide.
Industry analysts do not expect a rapid recovery.
According to the McKinsey & Company State of Fashion 2026 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 U.S.
Now, another historic luxury brand is reducing its retail footprint while accelerating a broader turnaround effort.
Burberry, the 170-year-old British luxury fashion house, closed 21 stores while opening nine new locations during fiscal 2026, ending the year with 410 stores globally as of March 28, 2026, according to the company’s latest earnings report.
The retailer said it expects overall store count 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 either in locations that are no longer appropriate or have profitability challenges,” said Burberry CEO Joshua Schulman in the company’s 2026 earnings call. “When it’s a center location where we just want to exit, we’ll exit. But in other cases, we will find a more profitable alternative to showcase the product.”
The restructuring effort is already contributing to improved profitability.
Burberry reported adjusted operating profit of £160 million (approximately $213.26 million) for fiscal 2026. The company said its cost-cutting initiatives generated £80 million (about $106.63 million) in savings during the year and remain on track to deliver £100 million (roughly $133.28 million) of annualized savings by 2027.
Executives also warned that geopolitical tensions and ongoing macroeconomic instability could continue to pressure consumer confidence across key luxury markets.
At the same time, Burberry has been investing more heavily in wholesale and department store partnerships to strengthen brand visibility and improve sales performance without relying exclusively on directly operated locations.
The company said upgraded in-store environments at retailers, including Saks Global, Bloomingdale’s, Nordstrom, and Galeries Lafayette, are generating stronger sell-through rates than some standalone Burberry locations.
The strategy reflects a broader shift underway across 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, simplifying operations, and reducing overproduction.
Early signs suggest Burberry’s turnaround may be stabilizing
Despite continued pressure across the luxury retail sector, several indicators suggest Burberry’s restructuring efforts may be beginning to gain traction.
In its fiscal year 2026 results, the company reported:
Revenue declined nearly 2% year over year
Comparable sales increased 2%
Sales growth was recorded across most regions, excluding Asia Pacific
Cost of sales rose 14%
Looking ahead to fiscal 2027, Burberry expects the impact of store reductions on revenue to remain broadly stable 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 remains closely watched across the luxury industry as brands continue navigating slower consumer demand in China, one of the sector’s most important markets.
Luxury retail is shifting toward hybrid operating models
As traditional retailers reevaluate their physical footprints, e-commerce continues to capture a larger share of consumer spending.
According to Capital One Shopping, 84.3% of Americans now shop online. U.S. e-commerce spending reached $1.34 trillion in 2024 and is projected to exceed $2.5 trillion in 2030.
Still, physical retail remains the dominant shopping channel globally.
Research from EY using data from Euromonitor found that brick-and-mortar stores accounted for around $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.
“It’s clear that the physical store still plays an important role,” said EY Global Retail Leader Malin Andrée and Consumer Senior Analyst Jon Copestake. “Not only do stores have plenty of runway left in delivering revenue, but they also have opportunities to drive new growth and alternative revenue streams and, by working in tandem with digital channels, they can maximize returns on investment.”
The challenge for many retailers is no longer deciding between digital and physical commerce. Instead, companies are increasingly being forced to determine how stores fit into a broader ecosystem where convenience, personalization, and operational efficiency matter more than store count alone.
“In 2026, the luxury sector is poised to regain its sparkle, but only for the brands willing to rethink the fundamentals,” said Interbrand Global Chief Strategy Officer Manfredi Ricca on Advertising Week.
“The strategy reset is not about abandoning heritage or chasing novelty for its own sake. It is about restoring balance: pricing that reflects real 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 have emerged across major brands over the past year. Here’s some of my previous coverage of retail closures:
According to Forrester, many retailers have struggled to modernize in-store experiences quickly enough to match 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 must continue experimenting with hybrid strategies that integrate digital and physical shopping experiences, explained Sharmila C. Chatterjee, marketing lecturer at MIT Sloan School of Management.
“The future of retail is a hybrid of online and offline channels,” said Chatterjee in a study. “To keep customers coming back, retailers need to make strategic investments, experiment with new approaches, and, inevitably, engage in some trial and error as they figure it out.”
As luxury retailers navigate slowing demand and changing consumer behavior, companies such as Burberry are increasingly treating stores less as standalone 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.
