Fitch keeps neutral outlook on European retail amid weak sales growth

Consumer confidence and willingness to spend will remain critical factors, Fitch said in its latest non-rating action commentary. It further noted that uncertainty around rising unemployment risks and higher taxes encouraging households to save more. Among Europe’s major developed markets, Germany and the UK are expected to show the weakest propensity to spend in 2026, while retailers in Spain should continue to benefit from a more supportive operating environment.

Retailers are responding by increasing consumer touchpoints, including opening smaller-format stores, strengthening online platforms through third-party partnerships, and better integrating digital and physical retail channels. Investment is expected to focus on logistics infrastructure, automation and store renovations, while own-store expansion remains limited, with growth increasingly pursued through franchising. Discounters, however, are likely to remain active in opening new stores to capture price-conscious consumers.

Fitch expects cash flow and credit metrics to remain relatively resilient despite stagnant revenues, supported by disciplined cost control and capital expenditure management. Modest improvements in fixed-charge coverage are projected, aided by debt repricing and refinancing at lower rates in 2025, although deleveraging is expected to be limited in 2026 due to weak EBITDA growth prospects. The agency added that the same three issuers remain categorised as ‘at risk’, with two now showing a higher probability of default, added the commentary.

ALCHEMPro News Desk (SG)