When Fewer Stores Mean Stronger Performance: Rethinking Value Creation

Store closures are no longer a sign a retailer is underperforming. Our experts discuss the vanity trap of store numbers and explain how to optimise your store network for profit.

In its most recent annual report, Inditex, the parent company of Zara, said the global fashion chain’s store count had fallen by 103 in 2025.¹ However, during the year, the fashion chain grew total selling space by 1.5% and increased profit before tax by about 3.5%.

The lesson for retailers is not that closing stores is inherently good; it’s that store count on its own tells you very little. What matters is how you optimise your portfolio for maximum profitability.

Store Numbers: The Vanity Trap

For decades, store count has been the defining metric of success in annual reports, trade press and investor updates, with bonus points for opening in a trendy capital such as London, Paris or Berlin.

The problem is that a growing footprint can look like a growth story to an owner or board even when it fails to grow profit. Scale without productivity destroys value.

How to Build a Store Network That Drives Profit

Beyond obvious tactics such as choosing a strategic location and performing catchment analysis, here are just some of the ways you can optimise your store network.

1. Rethink Incentives

Tie management incentives to mid-to-long-term profitability rather than the number of openings reported in a single year. A manager with 10 new stores has an easy story to tell a board or private equity owner. Closing an underperforming store is the harder, less rewarded decision, yet can be the right one.

2. Cost the Full Network, Not Just the Lease

Every additional store carries costs well beyond rent, such as staff, inventory and ongoing maintenance. We recently worked with a retailer that opened flagship stores in four major capitals, an arguably strong brand story. However, these were its only stores in those countries, making them costly to supply in isolation without the density of nearby locations.

3. Keep the Network Optimised for Maintenance and Refurbishment

A retailer with too many stores often finds maintenance, refurbishment and concept updating are the first costs cut when the business comes under financial pressure because it is spread across so many locations. The result is a vicious cycle in which stores look tired and convert less footfall. Size your portfolio to what you can consistently service and treat a stretched maintenance and refurbishment budget as a signal the network may be too large.

4. Match Stock Strategy to Store Requirements

The more locations a retailer runs, the harder inventory allocation is, and the more expensive replenishment and restocking become. There is a danger of excess stock getting tied up in smaller, weaker locations, leaving more successful flagships undersupplied. Moving stock between sites can cost more than the product itself is worth and sometimes the size of stock units is incompatible between stores.

The mistake is assuming a large network will absorb a stock imbalance on its own. However, product offering should be tailored not only to size and location type, but other factors such as regional climate, intensity of competition, and local consumer preferences.

One way to fix allocation mistakes is to allow stores to act as fulfilment centres, but this requires real-time stock visibility across all channels.

5. Match Your Portfolio to Your Target Customer

There is no single right answer on store size or number. As the following examples show, successful retailers match their portfolio to customer need:

• Inditex: the Spanish fashion and homeware group’s strategy is firmly focused on retail optimisation. It has closed smaller and less productive stores in favour of fewer, larger flagships. In addition, it has integrated stores with online fulfilment and invested in technology like RFID and automated warehouses. Across all its brands, it has reduced its store count by 27% while increasing net profit by 82% between 2018 and 2025.
• IKEA: Historically, the Swedish furniture giant relied on very large destination stores on the outskirts of cities. However, changing customer behaviour showed this format alone wasn’t enough to reach urban consumers. In response, it launched compact city-centre stores with click-and-collect points, kitchen design studios and selected products for immediate purchase. The result is a multi-format ecosystem (including online), which focuses on market coverage rather than square metreage.
• Marks & Spencer (M&S): In 2022, the U.K. multi-category retailer launched its Reshape for Growth plan. This involved transforming its network to better suit customer needs. This included creating larger food shops, closing older town-centre stores and investing in bigger full-line stores. Its adjusted profit before tax grew 81.6% in the following two years, from £482 million in 2022-2023 to £875.5 million in 2024-2025.²

6. Measure Profitability by Format and Channel

Store count alone will not tell you whether your network is working. Performance should be tracked by format and channel, covering leases, staffing and the productivity of online and consignment sales, not just headline turnover.

Online is often reported as a headline sales figure without a clear view of its actual profitability, and retailers running consignment arrangements within department stores rarely track whether those spaces are pulling their weight.

A store, an online channel and a consignment concession can all show healthy turnover while masking very different levels of profit. Retailers should track performance by format and channel as standard, not as a special exercise reserved for when numbers look concerning.

7. Ensure Clear Analysis and Ownership of Store Openings and Closures

Real estate teams tend to push to open stores, finance functions tend to push to close them, and brand teams focus on presence and visibility. Without a clear owner balancing these interests, usually the chief executive, closure decisions stall or get made too late.

Before closing a store, check whether the problem lies in human staffing factors or whether the local market has genuinely shifted. Do you have a good store team with the right number of staff for the specific footfall, sales and even time of day, week or year? Does the store have a strong manager and motivated staff who are up to speed on their customers, store metrics and objectives?

A well-run store in a declining location may still be worth closing. A poorly run store in a strong location may not be.

A Store Network Built on Evidence

The retailers in this article did not close or open stores for the sake of a headline. Inditex, IKEA and M&S each started from their own customers and cost base, then built a portfolio to match. This is the shift every retailer needs to make. Get that right, and profitability becomes the story.

Gordon Brothers partners with retailers to optimise asset value and deliver financial certainty during periods of change. With decades of experience, global reach and deep retail expertise, we design tailored solutions that help businesses navigate change, store closures, M&A activity and inventory optimisation, while protecting brand equity, minimising disruption and allowing management teams to remain focused on their core operations.

To explore any of the themes raised in this article in more detail, please get in touch with Olaf Galler or Berta Escudero.