ZACKS·2025-12-24 15:46Core Insights - Walmart Inc. and Costco Wholesale Corporation are two leading players in the global retail sector, each with distinct business models and strategies [1][2][3] Walmart Overview - Walmart operates over 10,750 stores globally, including supercenters and discount stores, and is expanding its e-commerce and digital advertising platforms [2] - The company has a market capitalization of $884.2 billion and is focusing on enhancing its omnichannel retail capabilities through its extensive store network [3][4] - Walmart's global e-commerce sales increased by 27% in Q3 of fiscal 2026, with U.S. e-commerce up 28% and international sales up 26% [5] - The shift towards higher-margin revenue streams, including advertising and membership income, now accounts for approximately one-third of Walmart's consolidated adjusted operating income [6] - Investments in technology and automation are central to Walmart's strategy, improving fulfillment efficiency and maintaining price leadership [7] - International operations are contributing to growth, particularly in Mexico, China, and India, although the company faces challenges such as intense competition and cost pressures [8] Costco Overview - Costco operates on a membership-based model, generating stable high-margin revenues from membership fees and maintaining competitive pricing through bulk purchasing [9][10] - The company reported over 20% growth in digitally enabled comparable sales in Q1 of fiscal 2026, driven by increased website traffic and app engagement [11] - Operational efficiency is a key advantage, with productivity gains from technology improving checkout speed and inventory management [12] - Despite its durable business model, Costco faces challenges from thin merchandise margins and fluctuating demand for discretionary items [13] Financial Performance and Estimates - The Zacks Consensus Estimate for Walmart's current fiscal-year sales suggests a year-over-year increase of 4.6%, with EPS expected to rise by 4.8% [14] - For Costco, the current fiscal-year sales and EPS estimates imply year-over-year growth of 7.5% and 11.7%, respectively [17] - Over the past year, Walmart's shares have increased by 19.7%, while Costco's shares have declined by 10.8% [20] Valuation Comparison - Walmart trades at a forward price-to-earnings multiple of 38.19, while Costco has a forward P/E of 41.38, indicating a relative valuation discount for Costco compared to its historical average [23] Investment Outlook - Walmart is positioned as a stronger option for investors seeking momentum and earnings diversification, while Costco remains a solid long-term investment focused on stability and consistency [24]