Athletic apparel retailer Lululemon (LULU) has filed a lawsuit against the warehouse giant Costco (COST) in a California federal court. Lululemon claims that Costco is selling products that are “confusingly similar” to its own distinctive, trademarked designs.
Don’t Miss TipRanks’ Half-Year Sale
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
- Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
LULU alleges that Costco’s private-label Kirkland brand sells lookalike clothes like its Scuba hoodies, Define jackets, and ABC pants. The lawsuit claims these similar designs violate Lululemon’s patent and trademark rights, and may confuse buyers into believing the products are genuine LULU items or made specifically for COST.
Importantly, the complaint points to articles from publications like The New York Times and The Washington Post, which also said Costco’s products are widely seen as near-identical replicas of Lululemon’s designs.
LULU Looks Beyond Damages
Lululemon is not just asking for damages but is also seeking a jury trial and a court order to stop Costco from selling the disputed items. The company noted that it invests heavily in design, innovation, and brand name. It claims that copycat products hurt its sales and make it harder for customers to trust the brand.
Investors must note that the case highlights the rise of “dupes” or cheaper alternatives that mimic high-end products. While some shoppers see them as budget-friendly finds, brands like Lululemon see them as a threat to their identity and bottom line.
It is worth mentioning that this is not Lululemon’s first legal battle over lookalikes. The company previously sued Peloton (PTON) over similar claims, though the two later reached a resolution and even joined hands on branded apparel.
Is LULU a Good Stock to Buy Now?
Turning to Wall Street, LULU stock has a Moderate Buy consensus rating based on 14 Buys, 12 Holds, and two Sells assigned in the last three months. At $302.86, the average Lululemon stock price target implies a 28.31% upside potential.
Is COST Stock a Buy or Sell?
On Tipranks, COST stock has a Moderate Buy consensus rating based on 16 Buys and seven Holds assigned in the last three months. At $1,106.89, the average Costco stock price target implies a 12.77% upside potential.
