Costco vs. Walmart: Which Retail Giant Should You Buy?

Core Viewpoint - The decision between investing in Walmart and Costco may hinge on valuation, despite both companies showing strong financial results amid economic uncertainty [1]. Group 1: Sales Performance - Both Walmart and Costco reported a 6% annual growth in net sales in their most recent quarters, indicating similar sales performance [2]. Group 2: Profitability - Walmart's net income increased by 34% year over year, while Costco's net income rose by 11%. However, Costco's net income growth was closely aligned with its operating income, which increased by 10%, contrasting with Walmart's operating income, which fell by less than 1% due to higher operating expenses [3]. Group 3: Investment Gains - Walmart's recent profit increase was primarily driven by unrealized investment gains, which may not reflect sustainable operational performance [4]. Group 4: Valuation Comparison - Walmart's price-to-earnings (P/E) ratio is 36, while Costco's is significantly higher at 50, making Walmart appear more reasonably valued compared to Costco, despite both companies being prominent retailers on a growth trajectory [6][7].