From BJ’s to Lululemon, retailers are cutting back on assortments

Retailers are cutting back on assortments to clean up their balance sheets.

As shoppers cut back on spending amid rising gas and food prices, companies are taking further steps to boost profitability and woo investors. In this year’s earnings calls, various retailers highlighted efforts to reduce the number of items they sell, commonly tracked as stock-keeping units (SKUs).

In March, dollar general The company said it has cut 1,500 SKUs. In August, under armor It said it has reduced SKUs by 25% over the past few years and plans to reduce them by another 25%. BJ’s Wholesale Club The company said it plans to reduce SKUs by about 20%. In September, lululemon The company announced that it has reduced SKUs in North America by 15%.

Reducing inventory can help your company stabilize sales or regain growth, and can reduce the likelihood that your company will be stuck with unnecessary inventory. But the move could also reduce consumer choice, a tradeoff many retailers have been willing to accept.

If a brand struggles to sell a particular product, it can lead to discounts and hurt profitability. If a company rolls the dice on a new product that ultimately doesn’t sell, some price reduction can be expected, but too many promotions can cause problems.

“If you have zero discounts, you’re not taking enough fashion risk,” said Simeon Siegel, senior retail analyst at Guggenheim Securities. “But discounts require correcting mistakes. We need to do it quickly.”

Under Armor and Lululemon are both facing fallout from what investors see as too many valuation cuts.

Under Armor’s operating income, which measures its fundamental profitability, turned negative in fiscal 2025 and fiscal 2026. The company said chasing unhealthy sales volumes and short-term profits won’t solve the problem.

“We now have quality control. We have fewer products with a greater purpose, more rigorous execution, and a clearer reason to buy,” Under Armor CEO Kevin Plank said during the company’s fiscal first-quarter earnings call in August. “We sell more of less product at higher list retail prices.”

Siegel said if retailers admit they want to shrink profits, the goal is to regain pricing power.

Lululemon increased sales by more than $500 million from fiscal year 2024 to fiscal year 2025. However, operating income decreased by approximately $300 million over the same period. The stock price has fallen about 65% over the past two years.

“Less sales of options is not the same as less sales of goods,” Siegel said. “Lulu has a long way to go, and simply cutting back on SKUs or saying we need a better product is not the answer.”

Siegel said even the best product can weaken a brand if consumed in excess.

Lululemon reported fiscal year 2025 U.S. sales of $6.3 billion. Siegel said companies typically reach a healthy saturation level at $3 billion to $4 billion in domestic sales.

“That’s the level at which they can be big and still be cool. Beyond that, they start cheapening what they represent, literally cheapening the product, but also cheapening the perception,” Siegel said.

He noted that Nike is an exception to this rule because it had $20 billion in sales in North America in fiscal year 2026.

Still, the apparel and footwear giant, whose stock price has plunged about 45% this year, said it was “rebalancing” its portfolio after seeing revenue from its Classic Shoes franchise fall by more than $2 billion in fiscal 2026, according to its fiscal 2026 fourth-quarter earnings report in June.

For small stores like Dollar General and large retailers like BJ’s, reducing selection doesn’t necessarily mean raising prices.

On the contrary, for stores that carry thousands of brands, removing certain products can help them better manage their inventory, improve their product offerings, and stabilize their business.

“When you shrink the box… when you say focus more on curation, it’s smaller in size, but you’re trying to re-establish why someone steps into your box in the first place. And the results are better, but they don’t necessarily add as much to the bottom line,” Siegel said.

BJ’s CEO Robert Eddy said reducing options, such as reducing the number of scents in body washes, will boost sales of products left on shelves and create room for more product categories not previously offered.

“This is a source of revenue growth, and it kind of gives us the formula to reduce SKUs and increase sales and increase margins,” Eddy said during the company’s fiscal 2026 second-quarter earnings call in August.

Dollar General announced in June 2025 that the elimination of 1,000 SKUs from the previous year gave more shelf space to its best-selling products, increasing sales. The company said it has reduced up to 1,500 SKUs by March 2026, benefiting the entire supply chain.

“Increasing productivity means getting products to shelves faster and getting consumers the right amount of items and products they’re looking for as quickly as possible,” Dollar General CEO Todd Vasos said during the company’s fiscal 2026 second-quarter earnings call in August. “As we move forward, the team is looking at continued SKU rationalization, albeit perhaps more surgical in nature.”

In reality, it is difficult to successfully extract products from shelves.

Box stores risk losing customers to competitors who offer discarded products. BJ’s, for example, admitted that previous attempts to reduce SKUs had failed.

“We just cut out the SKUs that were reducing sales, and then we put some SKUs back in. So what we’re doing now is removing unnecessary options,” Eddy said during the company’s earnings call in August. “Think about traditional soda. We no longer carry cans and 1-liter and 2-liter versions of the same product.”

On the other hand, publicly traded brands that recognize that sales need to decline in order to grow their businesses still have an answer for investors in the short term.

“It’s hard for a company to say they need to shrink something, but it’s dramatically harder to say they need to shrink their revenue,” Siegel said. “What happens often is that brands reach a peak, a healthy peak, push past that peak, and then take a pretty tough downhill slide.”