Costco vs. Walmart: Which Retail Stock Should You Buy Now?

Core Insights - Costco and Walmart are the primary retail stocks under consideration for investors, with Costco valued at approximately $434.3 billion and Walmart at around $803.6 billion [1][2] - Costco operates on a membership-based warehouse model, while Walmart utilizes a low-price strategy and a comprehensive e-commerce ecosystem [1][2] - The comparison between Costco and Walmart hinges on Costco's membership loyalty versus Walmart's extensive scale and omnichannel capabilities [3] Costco Overview - Costco's membership model is crucial for its growth, boasting a membership renewal rate 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 of fiscal 2025, with a total of 79.6 million paid household members, reflecting a 6.8% year-over-year growth [5] - The company plans to open 27 new warehouses in fiscal 2025, increasing its total to 914 [6] - E-commerce sales rose by 14.8% in Q3, with a 31% increase in items delivered through Costco Logistics [7] Walmart Overview - Walmart's market position is strong, with comparable sales growth in its core segments, particularly in groceries and health & wellness [9][10] - E-commerce sales grew by 22% in Q1 of fiscal 2026, supported by improved delivery capabilities [11] - High-margin revenue streams, including advertising and membership income, are expanding rapidly, enhancing Walmart's profit base [12] - International markets have contributed to Walmart's growth, with strong performances in regions like China and Flipkart [13] Financial Estimates - Costco's current fiscal-year sales and EPS are estimated to grow by 8.1% and 11.6%, respectively, with a consensus EPS estimate of $17.97 [15] - Walmart's current fiscal-year sales and EPS are projected to increase by 3.5% and 3.6%, respectively, with a consensus EPS estimate of $2.60 [18] Stock Performance - Over the past year, Costco shares have increased by 11.8%, while Walmart shares have surged by 35.1% [21] - Costco's forward P/E ratio is 49.32, while Walmart's is 36.36, indicating that Walmart is more attractively valued [23] Investment Outlook - Costco benefits from its membership model and customer loyalty, while Walmart leverages its global scale and diversified revenue streams [24] - Walmart is viewed as the stronger investment choice due to its steady growth drivers and more reasonable valuation [24]