German retailers warn of worsening conditions as costs squeeze profits

German retailers said worsening costs and weak demand were squeezing profits, with a new survey showing the sector entering the second half of 2026 under pressure on both sales and margins. The German Retail Association, or HDE, said 42% of the 600 companies it surveyed rated their current business situation as poor, and nearly two-thirds said conditions had deteriorated in the first half of 2026 from a year earlier.

The numbers point to more than a simple slowdown. HDE said 69% of companies had lower profits than a year earlier, while 65% expected sales in 2026 to come in slightly or significantly below 2025 levels. Only 18% expected higher sales, a sign that many retailers are preparing for another year of constrained household spending even as energy, labor and purchasing costs continue to climb.

Alexander von Preen, HDE’s president, said the mood had darkened further. “The situation is even more dramatic than it already was in the rather modest previous year,” he said, comparing consumer and company sentiment with Germany’s second coronavirus lockdown. His comments underscored how quickly the sector’s problems have moved from cautious concern to open alarm.

HDE is pressing the government for relief. The association wants better business conditions, opposes curbs on mini-jobs and is calling for a cap on non-wage labor costs at 40%. Those demands reflect a broader fear that fixed costs are rising faster than retailers can pass them on, especially for smaller and mid-sized chains with limited pricing power.

Even with the downbeat survey, HDE kept its 2026 forecast for nominal retail sales growth at 2%, equal to total turnover of €697.4 billion. That estimate suggests the industry is not bracing for collapse, but for a year of sluggish turnover and thinner profits. HDE’s own advocacy materials say Germany’s city centers have been hit for years by falling footfall, online shopping and consumer caution, and warn that many retail businesses may still be forced to shut down.

For Germany, that makes retail more than a sectoral complaint. Retail employs about 3.1 million people and remains a major gauge of domestic demand, which has struggled to regain momentum. The latest survey points to a fragile consumer backdrop and a wider competitiveness problem that continues to weigh on Europe’s largest economy.