Weakening consumer confidence and public fears of a slowing economy have driven distress among Europe’s retailers to its highest level since October 2014, according to a new report from Weil, Gotshal & Manges.
Retail and consumer goods firms have seen the largest quarterly rise in levels of distress across all the industry groups captured in the law firm’s index of european corporate distress.
The sector faces growing pressures on levels of investment, liquidity and profitability, the report said.
Although retail has experienced the sharpest rise, industrials and real estate remain ahead in terms of overall levels of distress. The index has increased in four out of the last five months and in February rose to 3.8 from 3 six months earlier.
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The report defines distress as uncertainty about the fundamental value of financial assets, volatility and increase in perceived risk. Common characteristics of corporate distress range from pressure on liquidity, reduced profitability, rising insolvency risk, falling valuations and reduced return on investment.
“The European macroeconomic environment remains challenging,” the report said. “Economic growth for the Euro Area as a whole was stagnant in the final quarter of 2024, following a 0.4% rise in Q3.”
Germany remains the continent’s major focal point of distress, with Weil’s measure indicating that the country’s corporate sector is at its most distressed since July 2020, while distress among UK corporates is up at its highest level since September 2023.