Jeweller Russell Jackson said the route to Pleasure Dome's back door was past their private car parks, and they were not happy about people being there late at night. Some of the shop owners were worried about security for their goods.
One of the signs was painted out yesterday, but others remain.
Mr Costello said he was new to Wanganui but his father, a shearer, was from the district and he had moved here after his father's death.
He had been asked to start a business selling sex aids, and he intended to stand for Wanganui District Council.
"I have come home and I see the holes. We live in a beautiful city. I have travelled all over the world, have an arts degree and worked in aviation and I am going to fix up some of those problems."
Pleasure Dome is his business and also sells online. He hopes to start a franchise.
He also said he had another business, growing kowhai and gem squash and trading as R & C Kowhai Nursery Ltd. The registrar of companies has initiated action to remove that company from its register, its website says. Mr Costello said he was trying to sell it and would like it removed from the register, but people kept objecting to that.
Helen Craig, the district council's town centre representative, said she had visited Mr Costello.
"I offered my personal opinion that a more subtle window display can be just as effective as overt displays.
"They should consider that a pet shop is just down the street, with many children visiting, so they should consider the appropriateness of their display."
Mrs Craig added: "In all large centres there is a wide variety of retail stores, and I commend the many retailers taking the initiative to display beautiful and clean windows that enhance the shopping experience for everyone in our beautiful centre."