No More Torching

Fashion brands are facing the prospect of higher inventory costs thanks to an EU ban on destroying unsold apparel, accessories and footwear. As of July 19, large companies are now prohibited from incinerating or sending unsold products to landfill. Between four percent and nine percent of textile products placed on the European market are destroyed before use, according to the European Commission, amounting for an estimated 264,000 to 594,000 tons of textiles each year. Why major brands ever thought this was morally justifiable is another question. The new rules also cover customer returns and force fashion retailers to prioritize selling products through discounts or alternative markets, donating them or preparing them for reuse.

The measure was introduced under the EU’s Ecodesign for Sustainable Products Regulation, which was green-lighted in 2024 to discourage overproduction and keep valuable materials in circulation. The ban is, of course, especially relevant for luxury brands, which typically use tightly controlled distribution channels and scarcity to protect their image, pricing, and margins. Destruction remains permitted in limited circumstances, including when products are deemed unsafe, counterfeit, infringe on intellectual property rights, or are damaged beyond viable repair. But companies using an exemption must provide evidence, publish annual reports on dumped goods, and keep records for five years or face fines. Medium-sized businesses will face the same rules starting in 2030; small and microbusinesses are exempt.

The new rules will impact US brands in two ways. First, American brands will have to fall in line with the new European rules; second, they may well conclude that a single disposal strategy globally makes more sense than adopting a piecemeal approach. The new restrictions follow a Hong Kong court case which revealed that Chanel had routinely destroyed thousands of unsold products as part of its inventory management. For its part, Chanel countered that this was not representative of current global practices where unsold merchandise passes through its recycling business, L’Atelier des Matières, launched in 2019 to recover materials for circular supply chains.

A Bad Month for Luxury

Piling on the bad news for luxury brands, Italian police recently searched Chanel’s offices as prosecutors broadened their investigation into alleged worker exploitation in the luxury fashion supply chain. The French fashion house is one of nine brands ordered to provide documents on corporate governance and supply chain controls, along with Moncler, Brunello Cucinelli, Bulgari, Jacob Cohen, Etro, Stefano Ricci, Goyard Italie, and Owenscorp Italia.

None are yet under formal investigation, and Chanel said in a statement that it is cooperating with the Italian authorities. It has already acted to end its connection with the subcontractor at the center of the inquiry after receiving an alert about possible labor abuse on May 18. It instructed its packaging supplier to terminate the relationship two days later.

The overall operation has expanded after investigators found products and subcontracting documents connected to the brands during searches of two Chinese-owned workshops accused of exploiting undocumented Chinese workers while producing garment bags, shopping bags and pouches for two companies supplying the luxury houses. The searches follow a similar police operation late last year that involved 13 fashion companies including powerhouses Gucci, Prada and Dolce & Gabbana.

Inditex’s Lefties Lands in the UK

Primark, watch out. Inditex is bringing its cheapest fashion brand to the UK’s value apparel market. The Spanish retail giant confirmed that Lefties, created as an outlet channel for Zara excess stock, has now evolved into a standalone fashion chain and will open its first British store at Liverpool One in late August.

The 50,000-square-foot flagship will mark a significant test of whether Inditex can replicate its European success in a competitive market dominated by Primark, H&M, Shein and increasingly aggressive discount-fashion operators. The move, which will see three UK stores by year-end, is strategically important because Lefties represents a different type of approach from Zara, targeting families and younger shoppers looking for affordable fashion, lifestyle products and technology-enabled convenience.

Lefties was founded in 1999 and launched its own brand collections over a decade ago. It has its own headquarters just outside Barcelona (the wider Inditex group is based in northwest Spain in A Coruna), including commercial and design teams, who “aim to bring accessible quality fashion to its customers.”

So far, its focus has been on mainland Europe, the Middle East and Mexico, but the move to the UK is interesting; can Europe’s most successful fashion group segment its customers without damaging flagship brand Zara’s positioning?  And if it can work in Britain, could Inditex see the US as a potential major market? Working the market, Zara has created a separate banner designed for cost-conscious consumers without competing directly with discount players.

Seven & i and Poland’s Zabka Group

Shares in Seven & i dipped at the end of July after the Japanese retailer confirmed that it had withdrawn from talks to buy a stake in Polish convenience store operator Żabka Group after the Tokyo-based retail group initiated a possible deal as it continues to look for new growth drivers. The 7-Eleven owner had been considering acquiring shares in Żabka held by unnamed funds, with the proposed investment likely ​to total at least several billion dollars for the company, which has an estimated market value of about $8 billion.

A deal would have extended Seven & i’s reach into Central and Eastern Europe, beyond its strongholds in Japan and the U.S., as the retailer seeks to grow its business under CEO Stephen Dacus, who took the helm last year. Warsaw-listed Żabka has more than 13,000 stores in Poland and Romania and is a highly regarded convenience store retailer in its own right. The company has previously expressed its desire to become Europe’s equivalent of 7-Eleven, expanding across the continent.

Seven & i has been struggling to improve its flagging business following a battle last year with Canadian convenience store rival Alimentation Couche-Tard, which had sought to take it over in what would have been Japan’s largest-ever foreign buyout. The retailer has been under pressure from investors because of lackluster returns and has faced mounting calls to double down on its core convenience store business. Last year it agreed to sell off its supermarkets business to private equity firm Bain Capital, while SoftBank Corp. and mobile payments operator PayPay are in discussions over investment in Seven & i with Sumitomo Mitsui Card also slated to take a stake.

The company has also appointed seasoned global operator Mauricio Leyva as CEO of 7-Eleven Inc. to lead the convenience retailer’s North American business. Leyva is expected to enhance the customer experience, strengthen its store network, improve operational performance and accelerate innovation.

Location, Location, Location

Following a year of healthy tenant expansion in 2025, real estate broker CBRE says retailers in Europe continue to focus on prime sites and are expressing increasing willingness to compromise on unit size but not on location. In the main street segment, strong competition for the best locations, combined with sub-five percent vacancy rates on most prime streets, means rents for the best units continue to be above quoted levels. Rome, Paris, and London are forecast to see the strongest main street rent growth this year. 

The uptick in rents is supporting most real estate assets. Shopping center rents are also trending stronger, moving away from last year’s convention where their growth was largely index-linked, CBRE said, while landlords are hiking out weaker-performing retailers. As a result, discounters are expected to expand their area of focus from secondary locations to better quality shopping centers, taking space in ‘cold areas’ of malls that have typically seen lower footfall. Retail parks, a European asset hot spot, have also continued to see strong tenant demand and virtually no vacancies, and CBRE said that it expects another year of rent growth outperformance in this segment.

It’s a similar story in the U.S. CBRE said that space availability will remain near historic lows in 2026, with only a slight uptick where big-box closures occur. New construction will remain limited due to financing constraints, high costs, and little land availability and expansions by grocery, value, and service-oriented retailers should largely offset continued restraint among discretionary retailers, keeping occupancy broadly stable. CBRE believes that grocery-anchored, neighborhood and strip centers, and high-income suburban corridors are positioned to outperform for both occupancy and rent growth.