Lululemon accuses Costco of selling bargain dupes of its luxury athleisure

Weeks after cutting its full-year profit guidance, leading to the stock’s worst day in over five years, Lululemon shares are still looking exhausted, with the stock down more than 36% year to date.

But one way that the Canadian athletic apparel retailer is trying to gain back some strength is by exercising control over “unauthorized” versions of its renowned yoga pants, hoodies, and jackets.

As reported by CNN, Lululemon has filed a lawsuit against Costco, accusing the wholesale giant of infringing on its intellectual property and “unlawfully” trading on its “reputation, goodwill and sweat equity” by selling knockoff versions of its products in Costco’s Kirkland range.

When life gives you lemons...

The 49-page lawsuit details several alleged similarities in design, as well as stark price differences in products —including Lululemon’s Scuba hoodie, which retails at $118, compared with the version from Costco that’s priced at just under $8.

Having notched seemingly unstoppable sales growth after launching its first store in 2000, with revenue growing by 34% on average per year for the last 20 years, the company’s sales have stagnated in recent quarters. Since the end of 2022, LULU’s sales growth has fallen flat in North America — its biggest market, accounting for ~75% of revenue in FY 24.

While headline revenue growth for the US and Canada was still just about in the green (up 3%) in Lululemon’s first-quarter results for FY 25, comparable sales decreased by 2%, with executives citing consumers remaining “cautious” and the impact of tariffs in the earnings call.

Though LULU has pushed on with price hikes and layoffs as a way to mitigate tariffs squeezing margins, mounting competition in the athleisure space from buzzy rivals like Alo and Vuori was already threatening its position as America’s go-to for quality workout gear… let alone replicas available for ~7% of the original’s price tag.

Same difference

The “dupe” economy has become big business, especially among Gen Z consumers — 71% of which said they would at least sometimes buy knockoff products, per a 2023 Business Insider survey — as counterfeit versions of all sorts of viral items, from Labubu dolls to Birkin bags, keep flying off shelves.

Lululemon itself previously sued exercise equipment company Peloton for ripping off its clothes in 2022… before announcing a five-year partnership with the brand only a year later.