Consumer Feedback Spurs Strategic Shift
Bath & Body Works is implementing a significant product line simplification after customers reported feeling overwhelmed by excessive choices in stores. CEO Daniel Heaf acknowledged during a November 20 earnings call that the current product assortment creates a "paradox of choice" that actually reduces purchase likelihood.
Focusing on Core Competencies
CFO Eva Boratto outlined concrete measures including the gradual discontinuation of underperforming categories like men's grooming and hair care products. This strategic pruning aims to reduce operational complexity while concentrating resources on high-growth potential areas that represent the company's core strengths.
Inventory Optimization as Priority
With sales declining, Bath & Body Works has identified inventory management as critical to its turnaround. The company is systematically evaluating its procurement team and processes to eliminate nonproductive stock-keeping units (SKUs). Heaf emphasized removing categories that "failed to meet growth expectations" to improve capital efficiency.
Cost Benefits of SKU Rationalization
Boratto highlighted multiple advantages of the SKU reduction strategy beyond enhanced customer experience. Simplified product lines will decrease procurement, warehousing and logistics expenses. These operational efficiencies will allow greater investment in consumer-centric, high-value products and services.
Seasonal Inventory Clearance
The company has aggressively cleared seasonal merchandise through promotional events, including its biannual sales. These efforts resulted in what management describes as "clean inventory" by the end of the third quarter, with reported inventory standing at approximately $1.3 billion compared to $1.2 billion year-over-year.
Industry-Wide Lean Inventory Trend
Bath & Body Works joins retailers like Lowe's and Advance Auto Parts in adopting lean inventory strategies. This industry movement recognizes that excessive SKUs can diminish rather than enhance sales productivity, with multiple major chains now implementing 15% or greater SKU reductions.
Balancing Risks and Opportunities
While product line simplification offers operational benefits, it carries potential risks including reduced product diversity and customer attrition. The company plans to mitigate these through continuous consumer research, optimized product mixes, and targeted marketing to maintain relevance across customer segments.
Boratto emphasized the company's commitment to data-driven decision making in inventory management, ensuring strategic exits from categories are timed to minimize disruption while maximizing operational efficiencies.