The Surprising Rise of Costco's Clothing Empire

Costco has positioned itself among the leading global apparel retailers.

Despite the fluctuating nature of its stock prices, often observed as it trades at a significant premium compared to its retail counterparts, Costco's long-term track record is impressive.

In a recent fiscal report, Costco highlighted a significant increase in men's clothing sales, marking 'double-digit' growth in the last quarter of its 2025 fiscal year.

Over the span of five years, from 2019 to 2024, Costco's revenue from apparel surged from $7 billion to approximately $9.7 billion, reflecting an almost 40% climb, as per GlobalData's evaluations. In contrast, other big players in the market expanded their clothing segments by about 28% and 21% respectively.

Though clothes make up a smaller fraction of Costco's total sales, the income they generate surpasses even some of the largest global apparel franchises, like Old Navy, whose sales reached $8.4 billion in fiscal 2024.

The Secret to Costco's Apparel Success

Costco has carved out success in the clothing sector by offering sought-after brand names alongside its exclusive Kirkland Signature line.

Nevertheless, the selection at Costco doesn’t match the variety found in larger retail chains like Walmart. A significant draw for customers is the thrill and unpredictability of discovering unexpected items during their shopping trips.

The company's buying strategies vary but generally involve direct dealings with manufacturers and strategic licensing agreements with major brands. Occasionally, Costco capitalizes on unique buying opportunities, creating a 'treasure hunt' atmosphere for shoppers, explained Joe Feldman from Telsey Advisory Group.

Feldman noted that limited availability of specific items in select stores fuels consumer excitement and urgency, often due to unique supplier circumstances or surplus acquisitions from external retailers.

Brand Strategy and Legal Challenges

In some cases, Costco collaborates with well-known brands to produce items under its own label, albeit keeping such arrangements discreet.

Recently, an athletic wear company brought a legal case against Costco, alleging that the retail giant's ambiguous manufacturing methods led some customers to mistakenly believe the retailer's products were sourced from Lululemon. The accusation further fueled speculation that Costco's offerings mirror Lululemon's designs at more wallet-friendly prices.

Regardless of the lawsuit’s outcome, it underscores the increasing influence Costco wields within the apparel industry.

Costco opted not to provide commentary to CNBC regarding their burgeoning role in the clothing marketplace.