Costco vs. Target: Which Discount Retailer Is the Better Bet?

Core Insights - Costco Wholesale Corporation (COST) and Target Corporation (TGT) are key players in the Retail–Discount Stores industry, with Costco having a market capitalization of approximately $414 billion and Target at about $48 billion [1][2] - Costco operates 908 warehouses globally, while Target has 1,981 store locations across the United States [1][2] - Evaluating the growth positioning of these retailers is essential amid changing consumer spending patterns and economic dynamics [3] Costco's Position - Costco's membership-based model is a significant growth driver, with high membership renewal rates of 92.7% in the U.S. and Canada and 90.2% globally [4] - Membership fee income increased by 10.4% year over year in Q3 2025, with 79.6 million paid household members, a 6.8% increase year over year [5][10] - The company plans to open 27 new warehouses in fiscal 2025, expanding its global presence [6] - E-commerce comparable sales rose 14.8% in Q3 2025, with a 31% increase in logistics deliveries [7][10] - Despite challenges such as currency headwinds and potential tariffs, Costco's model remains resilient [8] Target's Position - Target is focusing on brand presence, diverse product offerings, and expanding e-commerce capabilities to drive growth [9] - The company plans to open around 20 new stores and remodel existing locations in fiscal 2025 [11] - Target's third-party marketplace, Target Plus, saw over a 20% increase in Gross Merchandise Value (GMV) in the first quarter [12] - However, Target has issued a cautious outlook for fiscal 2025, expecting a low-single-digit decline in sales and adjusted earnings between $7.00-$9.00 per share [13] - Target's first-quarter performance showed challenges with declining sales and earnings, driven by weakening consumer demand [14] Financial Estimates - Costco's current fiscal-year sales and EPS estimates imply year-over-year growth of 8.1% and 11.6%, respectively [15] - Target's current fiscal-year sales and EPS estimates suggest a year-over-year decline of 1.8% and 14.8%, respectively [17] Stock Performance - Costco shares advanced 14.2% over the past year, while Target shares declined by 29% [20] - Costco's forward P/E ratio is 47.34, lower than its one-year median of 50.76, while Target's forward P/E ratio stands at 13.50 [21] Investment Outlook - Costco is viewed as a safer investment choice due to its stable membership model and efficient cost structure, while Target faces short-term challenges [23]