Retailers trim assortments to support margins and sales stability

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Retailers trim assortments for margins

Highlights

Dollar General trimmed 1,500 SKUs, Under Armour reduced SKUs by 25% with an additional 25% planned, and Lululemon cut North America SKUs by 15%, aiming to support margins as consumer spending slows.
Lululemon's sales grew by more than $500 million between fiscal 2024 and 2025 while operating profit dropped by about $300 million and its shares fell around 65% over two years.
Under Armour reported negative operating income in fiscal 2025 and 2026, with its CEO emphasizing quality focus, fewer products, and tighter execution amid ongoing investor concerns over markdowns.

SKU reduction strategies across retail

As reported by CNBC, retailers across several segments are highlighting SKU cuts as a tool to clean up balance sheets and improve operating performance while shoppers pull back on discretionary spending.

Dollar General said in March that it trimmed 1,500 SKUs. Under Armour said in August that 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%.

Reducing inventory breadth can help companies avoid being stuck with unwanted goods and can support a return to more stable sales. The trade-off is a narrower range of choices for consumers, a compromise many retailers are accepting as they try to protect profitability.

Guggenheim Securities senior retail analyst Simeon Siegel said discounting has a role when retailers take product risks, but added that markdowns should be used to correct mistakes quickly. He said selling fewer options does not necessarily mean selling fewer items, and argued that SKU cuts alone are not a complete solution for Lululemon.

Margin pressure and execution risks

Under Armour and Lululemon are both facing investor concern over excessive markdowns. Under Armour’s operating income turned negative in fiscal 2025 and 2026, and the company said its issues would not be solved by pursuing unhealthy sales volume or short-term revenue.

Chief Executive Kevin Plank said on Under Armour’s fiscal first-quarter earnings call that the company is managing for quality through fewer products, tighter execution and a clearer reason for consumers to buy. Lululemon, meanwhile, grew sales by more than $500 million from fiscal 2024 to 2025, yet its operating profit fell by about $300 million over the same period, while its shares are down around 65% over the past two years.

For chains such as Dollar General and BJ’s, the logic is somewhat different because reducing assortment does not necessarily create pricing power. Instead, cutting products can shift demand toward the remaining items, simplify inventory management and free up room for new categories.

BJ’s Chief Executive Robert Eddy said reducing choice can push sales into products that remain on shelves and lift margin dollars. Still, execution remains difficult, especially for box retailers that risk losing shoppers to rivals carrying the products they remove. BJ’s said a previous attempt to cut SKUs was unsuccessful because sales also fell, forcing the company to add some products back.

In our earlier report on 7-Eleven’s India store closures, we covered how Reliance Retail shut all 31 outlets nationwide and how the chain signaled it still wants a long-term presence in the market. We noted that rising costs and intensifying competition from larger retailers and quick-delivery apps are forcing convenience and small-format operators to rethink their models and operating approach.

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