From BJ’s to Lululemon, retailers are trimming assortments

Retailers are trimming assortments in an effort to clean up their balance sheets.

As shoppers cut spending in the face of high gas and food prices, businesses have pulled more levers to boost profitability and appease investors. During earnings calls this year, a range of retailers have highlighted efforts to reduce the number of items they sell, commonly tracked as stock keeping units, or SKUs.

In March, Dollar General said it trimmed 1,500 SKUs. In August, Under Armour said it shrunk SKUs by 25% over the past few years and plans to cut another 25%, while BJ’s Wholesale Club said it plans to reduce roughly 20% of SKUs. In September, Lululemon said it cut North America SKUs by 15%.

Trimming inventory can help a business stabilize its sales or even get back to growth, and can reduce the chances a company gets stuck with unwanted inventory. But the move can also leave consumers with less choice — a trade-off many retailers have been willing to make.

When a brand struggles to sell certain products, it can lead to discounting, which hurts profitability. Some markdowns are expected when businesses roll the dice on new products that don’t end up selling well, but too many promotions can cause problems.

“If you have zero discounting, you’re not taking enough fashion risk,” said Guggenheim Securities senior retail analyst Simeon Siegel. “But discounting needs to be fixing mistakes. It needs to be done quickly.”

Under Armour and Lululemon are both facing repercussions from what investors see as too many markdowns.

Under Armour’s operating income, which illustrates its underlying profitability, turned negative in fiscal 2025 and 2026. The company said its problems would not be solved by chasing unhealthy sales volume or short-term revenue.

“Today, we’re managing for quality. Fewer products with greater purpose, tighter execution and a clear reason to buy,” said Under Armour CEO Kevin Plank on the company’s fiscal first-quarter earnings call in August. “We will sell so much more of so many less products at a much higher full retail price.” 

Siegel said that when a retailer acknowledges it wants to shrink revenue, the goal is to regain pricing power.

Lululemon grew its sales by more than $500 million from fiscal 2024 to 2025. Yet its operating profit fell by about $300 million in the same time span. Shares are down around 65% over the past two years.

“Selling fewer options is not the same as selling fewer things,” said Siegel. “Lulu has a long way to go, and simply cutting SKUs, simply saying we need to have better product is not the answer.”

Siegel said too much of even the best product can dilute the value of a brand.

Lululemon reported $6.3 billion in U.S. sales in fiscal 2025. Siegel said $3 billion to $4 billion in domestic revenue is where companies typically hit a healthy saturation level. 

“It’s a level where they can be large and still cool. Above that, they start cheapening what they stand for, literally cheapening the product, but also cheapening the perception,” said Siegel.  

He noted that Nike is an exception to this rule, after posting $20 billion in North American sales in fiscal 2026.

Still, the apparel and footwear giant, which has seen shares crater around 45% this year, said it is “rebalancing” its portfolio, having reduced revenue from classic footwear franchises by more than $2 billion in fiscal 2026, according to its fiscal 2026 fourth-quarter earnings call in June. 

For small-box stores such as Dollar General and big-box retailers like BJ’s, cutting down the assortment doesn’t necessarily give them the ability to raise prices.

Rather, for those stores carrying thousands of brands, removing certain products can help them better manage inventory and refine their offerings to help stabilize the business.

“When you shrink a box … and say, I’m going to focus more on curation, you’re getting smaller, but you’re trying to reestablish why someone’s walking into your box in the first place. And so it does get better, but it doesn’t necessarily help your bottom line as much,” said Siegel.

BJ’s CEO Robert Eddy said reducing choice, such as cutting the number of scents of body wash, pushes sales into the remaining products on shelves and then makes room for more product categories that weren’t previously offered.

“That is sourcing sales growth as well and sort of giving us the formula where we can cut SKUs, and see sales go up, and see margin dollars go up,” Eddy said on the company’s fiscal 2026 second-quarter earnings call in August.

In June 2025, Dollar General said the elimination of 1,000 SKUs from the previous year opened up more shelf space for its best-selling products and added to its top line. By March 2026, the company said, it had reduced up to 1,500 SKUs, providing benefits to the overall supply chain.

“Being more productive there means getting product to the shelf faster and being there for the consumer with the right amount of items and products that she’s looking for as quickly as we possibly can,” Dollar General CEO Todd Vasos said in the company’s fiscal 2026 second-quarter earnings call in August. “As we go forward, the team is looking at continued SKU rationalization, albeit probably more surgical in nature.”

Successfully slashing products from shelves is difficult in practice.

Box stores risk losing customers to competitors that offer the products they scrapped. BJ’s, for instance, acknowledged that a previous attempt to cut SKUs was unsuccessful.

“We just cut SKUs which cut sales, and then we added some SKUs back and so really what we’re doing now is removing unnecessary choice,” Eddy said on the company’s earnings call in August. “Think about in traditional soda, we don’t carry cans and one-liters and two-liters of the same product anymore.”

Meanwhile, publicly traded brands that acknowledge sales need to decline in order for the business to grow still have answers to investors in the near term.

“It’s hard for a company ever to say we need to shrink anything, but it’s dramatically harder to say we need to shrink revenues,” said Siegel. “Frequently we find that brands hit a peak, a healthy peak, extend past the peak by forcing it and then find their way back down pretty harshly.”