From BJ’s to Lululemon, retailers are reducing their assortments

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

As consumers cut back on spending in the face of high gas and food prices, companies have pulled more levers to increase profitability and appease investors. During this year’s earnings calls, a number of retailers highlighted efforts to reduce the number of items they sell, typically considered stock-keeping units, or SKUs.

In March, Dollar General said it removed 1,500 SKUs. In August, Under Armor said it has reduced SKUs by 25% over the past few years and plans to reduce another 25%, while Big BJ club said it plans to cut about 20% of SKUs. In September, Lululemon said it reduced North America SKUs by 15%.

Reducing inventory can help a business stabilize sales or even return to growth, and can reduce the chances of a business getting stuck with unwanted inventory. But the move may also leave consumers with fewer choices – 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 companies roll the dice on new products that don’t sell well, but too much promotion can cause problems.

“If you don’t have any discounts, you’re not taking enough fashion risk,” said Simeon Siegel, senior analyst at Guggenheim Securities. “But the update must allow errors to be corrected. This must be done quickly.”

Both Under Armor and Lululemon are facing repercussions from what investors see as too many markdowns.

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

“Today we’re about quality. Fewer products with greater purpose, tighter execution and a clear reason to buy,” Under Armor CEO Kevin Plank said during the company’s first-quarter earnings conference call in August. “We will sell a lot more product with less product at a much higher retail price.”

Siegel said that when a retailer recognizes that it wants to reduce revenue, the goal is to regain its pricing power.

Lululemon increased its sales by more than $500 million between fiscal years 2024 and 2025. Yet its operating profit fell by about $300 million during the same period. Shares have fallen about 65% over the past two years.

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

Siegel said too many products, even the best ones, can dilute a brand’s value.

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

“It’s a level where they can be big and still be cool. Beyond that level, they start to devalue what they represent, literally devaluing the product, but also devaluing the perception,” Siegel said.

He noted that Nike is an exception to this rule, having recorded $20 billion in sales in North America in fiscal 2026.

However, the The apparel and footwear giant, whose shares have fallen about 45% this year, said it was “rebalancing” its portfolio, after cutting revenue from traditional footwear franchises by more than $2 billion in fiscal 2026, according to its fourth-quarter fiscal 2026 earnings call in June.

For small-box stores like Dollar General and big-box retailers like BJ’s, reducing assortment doesn’t necessarily give them the opportunity to raise prices.

On the contrary, for stores offering thousands of brands, removing certain products can help them better manage inventory and refine their offering to help stabilize 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 comes into your box in the first place. And so it gets better, but it doesn’t necessarily help your bottom line as much,” Siegel said.

BJ CEO Robert Eddy said reducing choice, such as reducing the number of body wash flavors, pushes sales on the remaining products on the shelves and then makes room for more product categories that were not previously offered.

“It also drives sales growth and kind of gives us the formula by which we can reduce SKUs, see sales increase and see margins increase,” Eddy said during 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 premium line. By March 2026, the company said, it had reduced up to 1,500 SKUs, providing benefits to the entire supply chain.

“Being more productive means getting products to shelves faster and being there for the consumer with the right amount of items and products they are 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 envisions continued SKU rationalization, although likely more surgical in nature.”

In practice, it is difficult to successfully remove products from the shelves.

Box stores risk losing customers to competitors who offer the products they have discarded. BJ’s, for example, acknowledged that a previous attempt to reduce SKUs had failed.

“We just reduced SKUs, which reduced sales, and then we added a few SKUs and what we’re doing now is removing unnecessary choices,” Eddy said during the company’s August earnings conference call. “Remember that in traditional sodas, we no longer offer one-liter or two-liter cans of the same product.”

Meanwhile, publicly traded brands that recognize their sales must decline for the business to grow still have answers for investors in the short term.

“It’s hard for a company to say they need to cut anything, but it’s considerably harder to say they need to cut revenue,” Siegel said. “We often find that brands reach a peak, a healthy peak, push past it, and then come back down pretty hard.”