Dive Brief:
- BJ’s Wholesale Club plans to slash about 20% of its SKUs over the next couple of years, President and CEO Robert Eddy said during an Aug. 21 earnings call.
- On average, legacy clubs currently have about 7,500 SKUs and the retailer hopes to cut its inventory assortment to 6,000 or 6,500 SKUs, Eddy said.
- The retailer identified some reduction categories in Q2 and “saw some good results,” Eddy said. The next wave of category cuts are set to occur in September and around the end of the year.
Dive Insight:
BJ’s Wholesale Club has made efforts to reduce its SKU count in the past, but its efforts were not done “in the right way,” Eddy said.
“We just cut SKUs, which cut sales, and then we added some SKUs back,” Eddy told analysts.
Now, BJ’s Wholesale Club aims to reduce “unnecessary choice” as the retailer finds itself “over SKUed,” per Eddy. For instance, the retailer may remove multiple scents of body wash and instead push that volume into the remaining body wash scents. Meanwhile, new products and white space categories would be added to the mix.
In turn, the new products and new white space category is helping the retailer identify where to cut SKUs while still increasing sales and margin dollars, Eddy said.
Beverages is another category where BJ’s Wholesale Club can cut out duplicated products.
“So, think about in traditional soda, we don't carry cans and one liter and two liters of the same product anymore, and we're adding in healthy soda like coffee and things like that,” Eddy said.
Inventory for the quarter was up 2% year over year on a per club basis, EVP and CFO Laura Felice said. In-stock levels, however, were flat YoY as the retailer focuses on right-sizing its inventory assortment.
Many retailers have been targeting better inventory health to optimize operations. Dollar General, for instance, cut more than 1,500 SKUs over the last few years as the company focuses on products with better turnaround times. In June, Duluth Trading Co. said it saw its fourth consecutive quarter of year-over-year inventory gains, partly due to SKU cuts and its enterprise planning process. The retailer reported that rightsizing its buys and clearing excess stock helped reduce inventory by 25% YoY.
Meanwhile, sportswear brand and retailer Under Armour has been taking a more disciplined approach to inventory management. Over the last two years, the company managed to trim its SKU mix by 25% and plans to continue pushing reductions with the goal of a better inventory assortment.
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