Europe’s Legacy Retailers Squeezed by Muted Consumer Demand and Structural Shifts: Sector Overview — European Retail

Executive Summary

Each of our Sector Overview reports provides an essential briefing on a sector or market. This report covers European retailing, with a focus on the UK, Germany and France.

• Structural trends challenging middleground legacy retailers include an ongoing attrition of market share to online and discount channels. In April, UK department-store chain Debenhams entered administration, handing control to its lenders; UK rivals House of Fraser and Marks & Spencer (M&S) are closing stores.
• In Germany and France, consumer spending on apparel has been weak, and even higher-growth retailers have seen challenges. Primark pointed to a “difficult Germany market” in January 2019. ASOS noted a “challenging performance” in Germany and France in April. However, Zalando reported growth of over 20% in the Germany region for the final quarter of 2018.
• At the time of writing, we are even less clear on the outcome of the Brexit process than we were when we published our previous Sector Overview on European retail in January.
• The lack of clarity over the UK’s exit from the EU is impacting UK consumer spending only moderately, according to various sources, including the Office for National Statistics (ONS). But the uncertainty has prompted retailers to invest in contingency plans and stockpiling in case of a no-deal Brexit.
• German consumers have been retrenching discretionary spending in the face of macro uncertainties such as Brexit. However, inflation has eased and unemployment has fallen to ultralow levels in Germany.