Lululemon Sues Costco Over Knockoff Pants And Hoodies: Accuses Retail Giant Of Trading On 'Sweat Equity' With Lookalike Designs

Lululemon Athletica Inc. LULU filed a patent infringement lawsuit against Costco Wholesale Corp. COST on Friday, alleging the warehouse retailer violated intellectual property rights by selling “knockoff” versions of its popular athletic wear.

What Happened: The Canada-based athleisure company accused Costco of selling unauthorized apparel that infringes on design patents for its ABC pants line, Define jacket collection, and Scuba zip-ups and hoodies, reported The Hill. Lululemon claims Costco “unlawfully traded upon Plaintiffs’ reputation, goodwill and sweat equity” through these alleged knockoffs.

The lawsuit specifically targets items sold under Costco’s private-label Kirkland brand, suggesting the retailer may be intentionally confusing customers into believing Lululemon supplies the clothing. Lululemon seeks unspecified monetary damages and an injunction to halt the sale of the disputed products.

A Lululemon spokesperson told Reuters the company takes “the responsibility of protecting and enforcing our intellectual property rights very seriously.”

Why It Matters: The lawsuit comes as Costco faces investor scrutiny over recent performance metrics. The retailer reported $20.97 billion in May sales, up 6.8% year-over-year, but shares fell nearly 4% after the announcement. U.S. comparable sales growth of 5.5% missed JPMorgan’s 7% estimate, marking a rare miss for the warehouse giant.

Costco operates over 600 U.S. warehouses, holding more than a 60% market share in the domestic warehouse club industry. The company’s membership-based model relies on high-volume sales at thin margins, making private-label products crucial for profitability.

Recent analyst coverage shows 13 of 15 analysts rate Costco as Outperform or Buy, with an average price target of $1,084.47.

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