From BJ’s to Lululemon, the trimmings retailer is diverse

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

As shoppers cut back on spending due to high gas and food prices, businesses have pulled more levers to boost profits and appease investors. During earnings calls this year, some retailers have highlighted efforts to reduce the number of items they sell, which are typically tracked as stock-keeping units, or SKUs.

In March, General Dollar said to cut 1,500 SKUs. In August, Under Armour said that SKUs have reduced by 25% over the past few years and plan to reduce by another 25%, whereas BJ Wholesale Club said it plans to reduce approximately 20% of SKUs. In September, Lululemon said it was cutting North American SKUs by 15%.

Cutting inventory can help a business stabilize sales or even regain growth, and it can reduce the chances of a company being stuck with unwanted inventory. But the move could also leave consumers with fewer choices — many retailers are willing to make.

When a brand struggles to sell a certain product, it can lead to discounts, which affects profits. Some markdowns are expected when businesses roll the dice on new products that don’t end up selling well, but too much promotion can cause problems.

“If you have zero discounts, you’re not taking enough fashion risks,” said Guggenheim Securities senior retail analyst Simeon Siegel. “But the discount has to fix the mistake. It has to be done quickly.”

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

Under Armour’s operating income, which reflects underlying profit, turned negative in fiscal 2025 and 2026. The company said the problem will not be solved by chasing unhealthy sales volumes or short-term earnings.

“Today, we manage for quality. Fewer products with greater purpose, tighter execution and a clear reason to buy,” Under Armor CEO Kevin Plank said on the fiscal first quarter call in August. “We’re going to sell more of our cheaper products at a higher retail price.”

Siegel said that when retailers admit they want to reduce revenue, the goal is to gain pricing power.

Lululemon grew its sales by more than $500 million from fiscal 2024 to 2025. But its operating profit fell by about $300 million during the same period. The stock is down about 65% over the past two years.

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

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

Lululemon reports $6.3 billion in U.S. sales in fiscal 2025. Siegel said $3 billion to $4 billion in domestic revenue is where the company typically reaches a healthy level of saturation.

“It’s a level where they can be big 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, having posted $20 billion in North American sales in fiscal 2026.

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

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

However, for stores that carry thousands of brands, removing certain products can help better manage inventory and refine offerings to help stabilize the business.

“When you shrink the box… and say, I’ll focus more on curation, you take it small, but you try to reestablish why people walk into the box in the first place. And so it’s better, but it doesn’t have to help the bottom as much,” said Siegel.

BJ’s CEO Robert Eddy said reducing options, such as reducing the amount of scent from body wash, pushing sales to products that are still on the shelves and then making room for more product categories that have not been offered before.

“It also drives sales growth and gives us a formula to be able to reduce SKUs, and see sales increase, and see margin dollars increase,” Eddy said on the fiscal 2026 earnings call in August.

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

“Being more productive there means getting products to the shelves faster and being there for consumers with the right amount of goods and products they’re looking for quickly,” Dollar General CEO Todd Vasos said on the company’s fiscal 2026 second-quarter earnings call in August. “As we move forward, the team is looking at ongoing SKU rationalization, although it may be more surgical.”

Successfully slashing products from the shelves is difficult in practice.

Box stores run the risk of losing customers to competitors who offer throwaway products. BJ’s, for example, admitted that previous attempts to cut SKUs were unsuccessful.

“We just cut the SKUs that were depressing our sales, then we added some more SKUs and what we’re doing now is we’re removing unnecessary options,” Eddy said on the company’s August earnings call. “Thinking about traditional soda, we don’t carry cans and one-liter and two-liter products anymore.”

Meanwhile, the public trademark that admits sales must decline in order for the business to grow still has an answer for investors in the near term.

“It’s hard for a company to ever say we need to reduce what we do, but it’s dramatically harder to say we need to reduce our profits,” said Siegel. “Often we find that brands reach a peak, a healthy peak, push past the peak and then find their way back the hard way.”