How Costco built clothing business
costco has become one of the largest clothing retailers in the world.
The company has been a long-term winner despite volatile swings in its stock price as it traded at a high multiple relative to its retail peers last year.
Costco said menswear sales showed a “double-digit” increase in its fiscal fourth-quarter 2025 earnings, according to a call last month.
Costco grew its annual apparel segment sales from 2019 to 2024, up nearly 40% from $7 billion to $9.7 billion, according to estimates from GlobalData. Comparatively rivals BJs And Sam’s Club grew its apparel businesses by approximately 28% and 21% respectively.
While the apparel segment still accounts for a relatively small portion of Costco’s overall sales, it brings in more than some of the world’s largest apparel retailers. Abercrombie and Fitch and Old Navy, with fiscal 2024 sales of $4.9 billion and $8.4 billion, respectively.
Costco has leveraged its success in clothing by offering popular brands such as: Colombia And Opennessalong with its exclusive brand Kirkland Signature.
Still, the clothing selection is limited compared to similar stores. Aim and Walmart. Experts say part of Costco’s appeal is that you never quite know what you might find when shopping there.
Although supply methods vary, it primarily works directly with manufacturers and provides licensing partnerships with big brands. Additionally, Telsey Advisory Group senior managing director Joe Feldman said the company will make “opportunistic” acquisitions, which will help create a treasure hunt-like shopping experience when a special one-off item is sold.
“Everybody gets excited and tries to go in and buy it. And it’s only available in a few stores,” Feldman said. “A particular retailer may have had a special overstock and sold it to Costco. Other times, they may have purchased the product from another retailer or a third party who may have an excess of that product.”
Costco has even been known to use well-known brands to produce its own private label products. But when this will happen is often deliberately vague.
lululemon He filed a lawsuit against Costco in June, accusing the warehouse club of “counterfeiting” its activewear. The activewear company claims uncertainty about its production led consumers to believe Lululemon was making products for Costco. Lululemon also claims that the wholesale club has not dispelled rumors around this speculation.
“It’s also been one of the most fantastic ad campaigns that Costco could have hoped for, because a lot of attention has been drawn to the fact that Costco has all these clothing brands. There are similar things to Lululemon, but they cost much less,” said Neil Saunders, managing director of GlobalData.
Regardless of the outcome of the lawsuit, it shows that major clothing retailers are taking Costco more seriously.
Costco declined to be interviewed or comment to CNBC for this story.
Watch the video to learn more about how Costco became a major player in the apparel space.
