Retailers Trim Product Assortments to Boost Profits, CNBC Reports

Major retailers including Dollar General, Under Armour, BJ’s Wholesale Club, and Lululemon are reducing product assortments and cutting stock keeping units to clean up balance sheets, manage inventory, and defend profit margins against a backdrop of high consumer gas and food prices, CNBC reported.

Shrinking Assortments to Protect Margins

Retailers across the board are actively pulling levers to boost profitability and appease nervous investors. As shoppers cut discretionary spending, businesses have turned to SKU rationalization. Dollar General trimmed 1,500 SKUs in March, while Under Armour shrunk its assortment by 25% over the past few years with plans for another 25% reduction.

Trimming inventory helps stabilize sales and prevents companies from getting stuck with unwanted goods that force heavy markdowns. According to Guggenheim Securities senior retail analyst Simeon Siegel, some discounting is expected when rolling the dice on unproven items. “If you have zero discounting, you’re not taking enough fashion risk,” Siegel said. However, excessive markdowns damage underlying profitability.

Markdowns Impact Operating Income for Under Armour and Lululemon

Under Armour and Lululemon both face direct repercussions from investor scrutiny over markdowns. Under Armour’s operating income turned negative in fiscal 2025 and 2026. “Today, we’re managing for quality. Fewer products with greater purpose, tighter execution and a clear reason to buy,” Under Armour CEO Kevin Plank stated on the company’s fiscal first-quarter earnings call in August. The brand aims to sell fewer products at a higher full retail price rather than chasing short-term volume.

Lululemon grew sales by more than $500 million from fiscal 2024 to 2025, but operating profit fell by about $300 million in the same span. Lululemon shares are down roughly 65% over the past two years.

Nike represents an exception to that saturation rule, posting $20 billion in North American sales in fiscal 2026. Even so, Nike reduced revenue from classic footwear franchises by more than $2 billion in fiscal 2026 as part of a broader portfolio rebalancing announced during its fourth-quarter earnings call in June.

Inventory Management in Big-Box and Discount Retail

Small-box and big-box discounters operate under different dynamics when slashing assortments. Removing select items helps stores manage inventory and refine offerings rather than directly raising prices. BJ’s Wholesale Club CEO Robert Eddy explained on the company’s August earnings call that cutting product variations, such as body wash scents, pushes sales into remaining inventory and frees up shelf space for previously unoffered product categories.

Dollar General eliminated 1,000 SKUs to clear shelf space for best-selling items, adding to its top line by June 2025.

Market response to these retail shifts has reflected varied investor sentiment. According to Pluang, Dollar General shares traded up 2.38% at USD 127.23, Lululemon gained 1.96% to USD 94.50, and Under Armour rose 0.84% to trade at USD 4.78 as of October 10, 2026.

Operational Challenges in SKU Reduction

Slashing products from shelves carries distinct risks, including alienating shoppers who might turn to competitors carrying the discarded items.

Publicly traded brands walking back revenues face intense pressure from investors. “It’s hard for a company ever to say we need to shrink anything, but it’s dramatically harder to say we need to shrink revenues,” Siegel noted regarding the psychological and financial hurdles of intentional contraction.