Major retailers across multiple sectors are implementing strategies to reduce the number of products they offer, a metric known as stock keeping units or SKUs. This trend emerged prominently during earnings calls throughout the year, with companies citing pressure from reduced consumer spending on essentials like gasoline and food as a primary motivation. The move aims to improve balance sheets, reduce excess inventory, and stabilize or accelerate sales growth.
Dollar General reduced its SKU count by 1,500 units in March and continued trimming through the spring. Under Armour announced plans to cut 25% of SKUs and reduce an additional 25% in coming periods. BJ’s Wholesale Club indicated plans to eliminate roughly 20% of its assortment, while Lululemon cut North America SKUs by 15% in September. For these retailers, the rationale centers on reducing markdowns that erode profitability. When inventory moves slowly, discounting becomes necessary, which can damage margins and investor confidence. Brands like Under Armour have explicitly stated their intention to prioritize quality over volume, seeking to raise full retail prices rather than chase sales through promotions.
However, the strategy presents different dynamics depending on retailer type. For premium apparel brands like Lululemon and Under Armour, cutting assortment aims to restore pricing power and brand perception. Lululemon’s fiscal 2025 sales grew over $500 million compared to the prior year, yet operating profit fell by roughly $300 million, illustrating the markdown problem. Industry analysts note that excessive product selection at high sales volumes can cheapen brand value. Conversely, box retailers like BJ’s and Dollar General use SKU reduction to improve inventory management and operational efficiency rather than raise prices, focusing instead on faster restocking and better shelf management.
Implementing these cuts successfully proves challenging in practice. Retailers risk losing customers to competitors offering eliminated products. BJ’s previously attempted SKU reductions that initially hurt sales, requiring some items to be reintroduced. The company is now pursuing more targeted elimination, such as removing duplicate product formats rather than entire categories. Dollar General reported that removing unnecessary SKUs freed shelf space for best-selling items and improved supply chain efficiency, allowing faster product delivery to stores.
The broader trend reflects a complex trade-off between consumer choice and business profitability. While cutting assortments reduces inventory risk and can improve margins for some retailers, it narrows customer options during a period of economic uncertainty. Success appears dependent on careful execution and understanding whether the goal is raising prices or improving operational efficiency.
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