Germany’s retail industry is signalling a tougher trading year as escalating input pressures collide with subdued demand, according to a new survey by the country’s main sector body. The German Retail Association (HDE) said on Tuesday that conditions have deteriorated for many store chains and merchants, with a large share reporting thinner margins and anticipating lower sales versus last year.
Margins under pressure, sentiment weak
In a poll of 600 companies, 42% described their present situation as poor. The association noted that almost two-thirds saw a worsening in the first six months of 2026 compared with the same period a year earlier. Profitability has eroded for a majority: 69% said earnings were down on the year.
HDE’s president, Alexander von Preen, drew a stark comparison with the depths of the pandemic-era slump, saying confidence among firms and shoppers had sunk to levels last seen during Germany’s second coronavirus lockdown.
“The situation is even more dramatic than it already was in the rather modest previous year,”
he said, adding that sentiment among both consumers and businesses remains depressed.
Costs rise while sales outlook darkens
Retailers cited an accumulation of cost pressures—especially energy, labour and purchasing—that continue to squeeze operating margins at a time when volumes are not keeping pace. Looking ahead, 65% of respondents expect 2026 turnover to come in slightly or significantly below 2025, compared with 53% holding that view in last year’s survey. Only 18% forecast an improvement in sales.
- Rising energy and wage bills weigh on profitability
- Weak demand limits the ability to pass on higher costs
- Most firms now anticipate lower sales than in 2025
Topline forecast held, but composition matters
Despite the bleaker backdrop, HDE kept its headline projection for the year unchanged, expecting nominal retail sales to expand by 2% in 2026. That would place total sector turnover at €697.4 billion (about $813 billion).
| Metric | Reading |
|---|---|
| Firms rating current situation as poor | 42% |
| Companies reporting lower profits year-on-year | 69% |
| Expect 2026 sales below 2025 | 65% |
| Expect higher 2026 sales | 18% |
| Nominal retail sales growth forecast (2026) | 2% |
| Projected total turnover (2026) | €697.4 billion |
Nominal growth in value terms can mask weaker performance in volume terms when inflation or input costs are elevated. The survey’s profitability readings, alongside the majority expecting lower sales than last year, suggest many businesses remain constrained in passing higher costs on to consumers without denting demand.
Policy asks: labour costs and mini-jobs
The association urged policymakers to speed efforts to improve the business environment. Its priorities include avoiding new restrictions on so‑called mini‑jobs and setting a ceiling on non‑wage labour costs at 40%. HDE argues these steps would help stabilise staffing and reduce cost burdens that have intensified over the past year.
For retailers, the combination of high fixed costs and tepid spending creates limited room to manoeuvre: rent, utilities and payrolls are difficult to trim quickly, while discounting to spur sales can erode margins further. Suppliers and logistics providers linked to the sector can also feel the pinch as orders are adjusted to align with weakened store traffic and tighter purchasing plans.
What to watch next
With retailers signalling caution, inventory management and pricing strategies are likely to remain front of mind through the second half. Any relief on energy bills or payroll-related charges would provide some breathing space, but the survey’s tone points to a slow and uneven recovery in trading conditions.
The HDE findings come as businesses weigh the risk that prolonged cost pressures could harden into reduced investment and hiring. For households, persistent promotional activity may continue in categories where retailers are competing to protect volumes, while discretionary items could see thinner ranges as merchants prioritise essentials and cash flow.
