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How Costco built clothing business
Costco has become one of the world’s biggest clothing retailers.
Despite volatile stock price swings over the last year as it trades at a high multiple relative to its retail peers, the company has been a long-term winner.
Costco said men’s apparel sales were up “double digits” in its fiscal fourth-quarter 2025 earnings, according to a call last month.
From 2019 to 2024, Costco grew its annual apparel segment sales from $7 billion to $9.7 billion, a nearly 40% increase, according to estimates by GlobalData. Comparatively, its competitors BJ’s and Sam’s Club grew their apparel businesses by about 28% and 21%, respectively.
While the apparel segment is still a relatively small portion of Costco’s overall sales, it brings in more than some of the world’s largest apparel retailers like Abercrombie & Fitch and Old Navy, whose fiscal 2024 sales were $4.9 billion and $8.4 billion, respectively.
Costco has driven its success in clothing by offering popular brands like Columbia and Gap, along with its private label Kirkland Signature.
Still, its clothing selection is limited compared to stores like Target and Walmart. Experts say that part of Costco’s appeal is never quite knowing what you may find shopping there.
Its procurement methods vary, but it primarily works directly with manufacturers and secures licensing partnerships with major brands. Additionally, the company will make “opportunistic” purchases, which helps to create that treasure hunt-like shopping experience when a special one-off product is for sale, said Telsey Advisory Group senior managing director Joe Feldman.
“Everybody gets excited and tries to go in and buy it. And it’s only in a handful of stores,” said Feldman “There could have been a special overrun at a particular vendor, and they sold it to Costco. Other times, they might buy it from another retailer or a third party that may have excess of that item.”
Costco has even been known to use well known brands to produce its own private-label products. However, it is typically intentionally unclear when this happens.
Lululemon filed a lawsuit against Costco in June, accusing the warehouse club of “duping” its athletic wear. The athleisure company claims that the ambiguity around its manufacturing led consumers to believe that Lululemon was producing products for Costco. Lululemon also alleges the wholesale club did not dispel rumors around this speculation.
“It’s also been one of the most fantastic advertising campaigns that Costco could hope for, because it’s drawn enormous attention to the fact that Costco has all these clothing lines. They have things that may be similar to Lululemon, but that are a much lower cost,” said GlobalData managing director Neil Saunders.
Regardless of the lawsuit’s outcome, it’s an indication that major clothing retailers are taking Costco more seriously.
Costco declined to give an interview or comment to CNBC for this story.
Watch the video to learn more about how Costco has become a major player in the apparel space.
