Same-store sales fell 4% in the second quarter, and operating income plummeted 72%. Net sales were $422 million. On an earnings call with analysts, Bath & Body CEO Diane Neal blamed "over assortment." Translation: Too much of a good thing.
"We have created an assortment reduction test in 50 stores that pares down our offerings in key brands that we want to sell and also emphasizes our key items within these brands," Ms. Neal said.
While the test is relatively small (about 3% of stores), the cutbacks aren't. The number of products will be slashed 40%. The company declined to comment for this story.
Caught in the middle
In a recent quest for growth, Bath & Body has entered makeup, anti-aging skin care and high-end hair care. But at the same time, the competition has gotten tougher. Mass retailers Target, Wal-Mart and Kmart have stepped up the quality of the personal-care products offered in their stores -- at lower prices. And Limited Brands has been in flux. The company shed 75% of its Express and Limited ownership to focus on its more-profitable Victoria's Secret division, leaving Bath & Body caught in the middle.
The decision to pare down offerings was applauded by marketing experts who contend consumers are overwhelmed by the dizzying array of choices. "It's the smartest thing they or anyone else like them could do," said Barry Schwartz, author of "The Paradox of Choice." "I predict that the effect will be that people take less time, are more satisfied with what they buy and they will sell more."
Mr. Schwartz added that while researching his book, he studied businesses that offered fewer options, and the result was always improved sales. "There's a reason why Trader Joe's is the fastest-growing supermarket chain in the country," he said. "They have very limited choices."
And you can expect to see more stores doing the same. "There are a number of retailers that have gone through and picked out the [stock-keeping units] that will give them the biggest bang for their buck," said Stacy Janiak of Deloitte. "I definitely see it as a trend."
However, Karen Grant, senior beauty industry analyst at NPD Group, warned that cutting back can be a mixed bag. While consumers are reluctant to try brands they're unfamiliar with, they shop at specialty beauty stores because of the selection and the expectation of something new.