Major Retailers Cut Product Lines to Boost Profitability Amid Consumer Spending Slows

In a move designed to strengthen balance sheets and appeal to investors, major retailers are systematically reducing the number of products they offer. As consumers tighten their belts in response to persistently high gas and food prices, companies such as BJ’s Wholesale Club, Lululemon, and Dollar General have announced significant cuts to their stock-keeping units (SKUs) during recent earnings calls.

The trend has accelerated throughout the year. In March, Dollar General revealed it had removed 1,500 SKUs. By August, Under Armour reported shrinking its inventory by 25% over recent years and outlined plans for another 25% reduction, while BJ’s Wholesale Club announced intentions to cut roughly 20% of its product lines. Just last month, Lululemon disclosed a 15% reduction in its North American SKUs.

Strategic inventory reduction aims to prevent companies from being left with unsold merchandise and to restore sales momentum. However, this approach inevitably limits consumer choice—a trade-off many executives argue is necessary.

Simeon Siegel, a senior retail analyst at Guggenheim Securities, noted that while some discounting is an inherent risk when launching new products, excessive markdowns signal deeper profitability issues. “If you have zero discounting, you’re not taking enough fashion risk,” Siegel said. “But discounting needs to be fixing mistakes. It needs to be done quickly.”

Both Under Armour and Lululemon have faced investor pressure regarding aggressive discounting. Under Armour’s operating income turned negative in fiscal years 2025 and 2026. CEO Kevin Plank stated during an August earnings call that the company is prioritizing quality over volume. “Fewer products with greater purpose, tighter execution and a clear reason to buy,” Plank said. “We will sell so much more of so many less products at a much higher full retail price.”

Siegel explained that when retailers openly accept lower revenue targets, the objective is often to regain pricing power. Lululemon, despite growing sales by over $500 million between fiscal 2024 and 2025, saw operating profit drop by approximately $300 million in the same period. Its shares have fallen roughly 65% over two years.

“Selling fewer options is not the same as selling fewer things,” Siegel observed. “Lulu has a long way to go, and simply cutting SKUs, simply saying we need to have better product is not the answer.” He added that even premium products can dilute a brand’s value if overproduced, citing that $3 billion to $4 billion in U.S. revenue is typically the healthy saturation point for brands like Lululemon. Nike, with $20 billion in North American sales, remains a notable exception.

For big-box and discount retailers like BJ’s and Dollar General, the goal differs from luxury apparel brands; these companies generally cannot raise prices after cutting items. Instead, curation helps refine offerings and stabilize operations.

BJ’s CEO Robert Eddy described the strategy as redirecting sales toward remaining products and creating space for new categories. “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.

Dollar General CEO Todd Vasos highlighted that removing 1,500 SKUs by March 2026 improved supply chain efficiency. “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,” Vasos said.

However, the strategy carries risks. BJ’s admitted a previous SKU reduction attempt failed because it simply cut sales before adding products back in. Eddy clarified that the current approach focuses on removing unnecessary choice, such as stocking only one container size for traditional sodas rather than cans, one-liter, and two-liter bottles.

Siegel warned that admitting a need for shrinkage is difficult for publicly traded companies. “It’s dramatically harder to say we need to shrink revenues,” he said. “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.”