The State of Retail in 2026: AI, Closures, and Private Equity

At Mid-America Store Fixtures, we’re always keeping an eye on the state of retail. If you’ve read some of our previous posts, you may recall our 2025 article around rising store closures, which were a defining trend across the industry in 2025. Now, almost halfway into 2026, we are noticing a markedly different atmosphere in the retail market. Let's talk about it.

Leaders at MASF have identified three “key players” shaping today’s retail market: artificial intelligence, private equity, and the growing push toward right-sizing operations.

Each of these factors is influencing how retailers make decisions about their stores, investments, and long-term strategies. In the sections ahead, we’ll take a closer look at how these forces are shaping the market and why they matter to retailers across the country.

In the end, we hope our insight into these forces can give you some context for navigating today’s retail environment. Because as we’ll come to see throughout this article, these trends matter greatly—but how you and your team choose to respond to them can make all the difference.

AI and the Retail Operation

Across nearly every industry, businesses are diving headfirst into the world of artificial intelligence, searching for ways it can improve efficiency and reduce costs. The retail industry is no exception, and the numbers paint a clear picture of where things are heading. In a recent article, the NRF (National Retail Federation) notes:

“IDC has reported that year-over-year spending on artificial intelligence is expected to grow by 31.9% between 2025 and 2029.”

With investment increasing this rapidly, the natural question becomes: what exactly are retailers using AI for? There isn’t just one application. Retailers are already exploring a wide range of uses across both customer-facing experiences and back-end operations.

AI in Customer Experience

One of the most visible applications is the rise of AI-powered chatbots. According to the previously mentioned NRF article, these tools have “transformed customer service” by providing “instant support, answering queries and assisting with purchases around the clock,” while also delivering personalized recommendations based on customer data. As many retailers have seen, today’s shoppers increasingly expect personalized experiences, and AI provides a scalable and cost-effective way to meet those expectations. It’s no surprise, then, that “Gartner projects that by the end of 2026, 40% of enterprise applications will include task-specific AI agents.”

AI Behind the Scenes

However, chatbots represent only a small part of AI’s potential in retail. A Forbes article highlighting the growing role of artificial intelligence in the industry points to several additional applications that go far beyond customer service. These include inventory management, demand forecasting, route planning, price optimization, and assortment planning, among other uses.

Through advanced algorithms, AI systems can analyze massive amounts of data, including purchasing trends, historical sales patterns, market conditions, delivery logistics, competitor pricing, and shifting demand patterns. More importantly, these tools can identify patterns and project future outcomes, helping retailers make smarter operational decisions.

It’s this combination of speed, scale, and predictive capability that has many retailers optimistic about AI’s role in the future of the industry. As NRF notes, “Most hope that smarter forecasting, automation and logistics efficiency will go a long way toward safeguarding margins,” which is why “no one is planning to take their foot off the AI pedal in 2026.”

Private Equity Dominates Retail Space

Private equity is another force becoming increasingly influential across the retail industry. These investment firms raise large pools of capital, acquire companies, and then attempt to increase their value before eventually selling them or taking them public again. In recent years, this model has expanded rapidly as firms search for new sources of capital and new industries to invest in.

An article from Stanford Graduate School of Business highlights how the industry is now pushing toward what some call the “democratization” of private equity. The article points to a comment from BlackRock CEO Larry Fink, who said the goal is to open private markets that have historically been “locked behind high walls, with gates that open only for the wealthiest or largest market participants.” By allowing retirement accounts and individual investors to participate, private equity firms are eyeing what the article described as “a once-in-a-generation opportunity to tap a vast pool of fresh capital.”

However, the article also notes that expanding private equity into new markets introduces additional risks. Stanford Professor Amit Seru warns that “for retail investors, the danger isn’t just volatility — it’s the slow build of hidden risk until it breaks all at once.” As more capital flows into private equity-backed companies, those risks can translate into significant operational changes for the businesses involved, including restructurings, ownership transitions, and, in some cases, store closures and bankruptcies.

Private Equity's Impact on Retail Closures

Retail has become one of the sectors where the risks of private equity investment have been especially visible. According to research cited by Reinvention.com, private equity firms have been involved in a large share of major corporate failures in recent years. In fact, the Private Equity Stakeholder Project reported that private equity firms were connected to “70% of the largest 2024 US corporate bankruptcies.”

The article cites several examples where private equity played a role in major retail closures, including the bankruptcies of Party City, JOANN, Sears, and Kmart. While every situation is different, many of these examples illustrate how leveraged buyouts and aggressive financial restructuring can significantly reshape a retailer's operations, sometimes resulting in the worst-case scenario of bankruptcy.

The Growing Role of Private Equity

Despite these mixed outcomes, interest in private equity shows little sign of slowing down. A recent outlook from PwC notes that “private equity firms remain under pressure to deploy large amounts of capital,” meaning investors are actively seeking opportunities across multiple industries, including retail.

For retailers, this trend means private equity will likely remain a significant presence in the years ahead. Some brands may benefit from new capital, restructuring strategies, or operational changes, while others may face difficult transitions as ownership structures evolve. Either way, private equity’s growing role isn’t going away anytime soon, and it’s something retail leaders will need to keep a close eye on.

Right-Sizing Operations

In 2025, the trend of store closures and downsizing was our key concern, with store closures outpacing openings for the first time since 2020. That trend does not appear to be changing course in 2026. However, not every closure signals a struggling business. In some cases, retailers are carefully reshaping their operations, closing underperforming locations while reinvesting in stronger markets.

We highlighted a strong example of this in relation to the Macy's Bold New Chapter initiative. In that article, we took a closer look at the company’s plan and what it reveals about how retailers are adapting to today’s challenging environment. Let’s revisit that example through the lens of what it could mean for retail in 2026.

Macy's "Bold New Chapter"

As reported by Forbes, Macy’s is in the middle of a long-term plan to close a number of underperforming stores as part of a broader transformation strategy. Rather than simply shrinking to survive, the company has been strategically repositioning its business by focusing investment on locations and brands with the greatest long-term potential.

Macy's initial announcement of their "Bold New Chapter" covered how they're centering this strategy around three key priorities. First, Macy’s is working to strengthen its core brand by modernizing store environments, improving product assortments, and creating a smoother shopping experience across both physical and digital channels. Second, the company is investing heavily in stronger-performing segments of its portfolio, particularly luxury brands such as Bloomingdale’s and Bluemercury.

Lastly, Macy’s is modernizing its operational infrastructure. Improvements in inventory planning, fulfillment systems, and technology platforms are designed to create a more efficient operating model that better supports today’s omni-channel retail environment.

Early results suggest these changes may be gaining traction, with many of the company’s reinvested locations showing improved performance, as proudly displayed in this public letter from Macy's CEO, Tony Spring.

Navigating a Changing Retail Landscape

Macy’s approach highlights an important point about the current retail environment: closures alone do not tell the whole story. Rising costs, shifting consumer expectations, supply chain disruptions, and increased competition are all putting pressure on retailers to reassess their store networks and operations.

What matters most is how businesses respond to those pressures. In Macy’s case, leadership took a hard look at the company’s position and made difficult decisions about where to scale back and where to reinvest. Their “right-sizing” strategy has begun to show positive results, even in an environment where many other retailers continue to struggle.

Examples like this illustrate that operational changes such as store closures are only one part of the equation. The thinking behind those decisions, and the leadership guiding them, is often the difference between a company that regains momentum and one that continues to lose ground.

Consumers in 2026: In Search of Savings

Stepping back a bit, one thread connecting many of the forces shaping retail in 2026 is simple: consumers are looking for value. That is especially true among younger shoppers. Deloitte found that Gen Z shoppers are “more likely to seek deals (95%),” while its 2026 retail outlook also reports that “four in 10 Americans now demonstrate deal-driven or cost-conscious habits.”

That lines up with what many retailers are seeing on the ground. Inflation, tariff uncertainty, and tighter household budgets have made shoppers more cautious about discretionary spending. In further reporting from Deloitte in its outlook for 2026, the firm noted that “rising prices” remain a top concern for U.S. consumers, with many shoppers trading down and increasingly turning to value-oriented retailers.

Pressure on Luxury and Mid-Market Retail

One natural result of this environment is that higher-end and mid-tier retailers are under more pressure. One example we discussed in a previous article is Saks Global, the luxury retail parent company behind Saks Fifth Avenue, Neiman Marcus, and Bergdorf Goodman, which filed for Chapter 11 bankruptcy. Since we wrote that article, additional reporting from Reuters has indicated that the company has faced further financial strain in 2026 following its misguided acquisition of Neiman Marcus. According to Reuters, the deal has “saddled Saks with billions of dollars of debt.”

The previously mentioned Macy’s strategy also reflects this consumer shift, though in a more nuanced way. Rather than treating every part of the business the same, Macy’s has been narrowing its focus, closing weaker stores while investing in the areas of its portfolio that are still showing stronger momentum. In other words, today’s market is rewarding retailers that are realistic about where customers still see value and where they no longer do.

The Rise of Value Retail

On the other side of the market, value-oriented retailers are finding opportunity. As we explored in our article on Ollie's, the company stayed disciplined, stuck to its identity, and continued expanding while many competitors struggled. That formula fits today’s environment well: when shoppers are looking for bargains, a retailer built around low prices and closeout deals is naturally positioned to win.

That same trend is visible at other discount chains. Dollar Tree reported that its third-quarter 2025 “net sales increased 11.0% to $13.9 billion,” reflecting continued demand for low-price retail options. Dollar General has seen similar momentum. According to reporting from Reuters, the company benefited from “value-seeking shoppers across income levels” and posted a 2.8% rise in same-store sales during one 2025 quarter.

Together, these results highlight how discount retailers are benefiting from the current economic environment, as shoppers increasingly prioritize affordability and look for ways to stretch their budgets.

What This Means for 2026

These trends suggest that consumers’ search for savings will heavily shape retail in 2026. Value-focused brands may have the clearest tailwind, while luxury and mid-market players may face a tougher road. But as with everything else that we’ve covered, market pressure alone does not determine the outcome. How companies adjust to that pressure is often what separates those that stabilize from those that keep sliding, as we can see from the juxtaposition of Macy’s and Saks Global.

The Future of Retail: Sow Seeds, Reap Rewards

By now, you’ve likely noticed a pattern in the way many of our articles have closed, with repeated emphasis on the importance of leadership and the decisions those leaders make. That’s not by accident. In many ways, it’s the central takeaway from everything we’ve discussed.

While the three forces we identified—AI, private equity, and right-sizing operations—will all play major roles in shaping retail in 2026, leadership will ultimately determine whether those forces become opportunities or problems. Throughout this article, we’ve seen examples of how intentional leadership choices shape outcomes. Ollie’s leadership stayed disciplined during the turbulence of COVID and came out stronger on the other side. Macy’s leadership took a hard look at its business, communicated its strategy openly, and executed a restructuring plan that is already beginning to show positive results. On the other side, Saks Global made an ill-advised merger in response to market pressures and is now facing serious financial strain.

So, if we at MASF can leave you with one thought for the year ahead, it’s this: leadership is everything. The retail environment will continue to face difficult and sometimes unpredictable challenges, but strong leadership that understands a brand’s core identity and remains agile in responding to shifting market demands will be best positioned for long-term success.

The seeds leaders plant today are the ones they will reap tomorrow. So, as 2026 unfolds, now is the time to start planting.