Dive Brief:
- Dollar General cut more than 1,500 SKUs from its inventory over the last few years, COO Emily Taylor said on a March 12 earnings call.
- Merchandise levels dropped 5.7% year over year in the quarter ending Jan. 30, down $379 million, EVP and CFO Donny Lau said. Stores averaged a 7% decline in inventory levels.
- “The team has done just a fabulous job over the last two years, quite frankly, in reducing inventory,” CEO Todd Vasos said during the call. “And there's more to come.”
Dive Insight:
Dollar General has been targeting leaner inventories for some time, with Vasos noting last quarter that SKU reduction has been a "big win" for the company as prioritizing products with faster turnarounds helped lift the retailer’s top line.
Vasos affirmed this quarter that SKU reduction has “been the cornerstone of part of our stabilization of retail.” Meanwhile, Lau noted that merchandise levels stood at $6.3 billion for the quarter.
“Importantly, the team continues to do a terrific job reducing inventory while driving sales and improving in-stock levels,” Lau told analysts. “Overall, we're pleased with our inventory position and moving forward, we're focused on growing inventory at a rate below our sales growth.”
In-stocks for the quarter were up roughly 250 basis points YoY, and Dollar General aims to continue that focus to help its in-store business and delivery, Taylor said.
Dollar General has prioritized other aspects of its supply chain to support its better inventory management efforts. For instance, Taylor noted that Dollar General’s distribution centers “are executing more aggressive seasonal sorts,” which help move products to shelves faster.
The retailer has also been leveraging its private truck fleet to help with better inventory movements, including fewer SKUs in-store, Vasos said. The efforts help support Dollar General’s push to reduce the time spent stocking shelves, SKU rationalization and inventory optimization.
Several other retailers have also been slashing SKUs. Bath & Body Works, for instance, is adjusting its inventory mix due to customer complaints that the store is overwhelming. Lowe’s is also pursuing leaner inventories, aiming to cut 15% of its SKUs by the end of 2025.
