Costco Just Showed Why It’s a Better Buy Than Walmart

Key Points

• Costco reported a 6.7% rise in comparable sales and beat estimates on both revenue and earnings in its latest quarter.

• Walmart’s comparable sales grew only 2.6%, the slowest pace in six years.

• Costco continues to have significant growth potential with new members, store expansions, and strong e‑commerce performance.

Costco (NASDAQ:COST) released its fourth‑quarter results after market close on Thursday. While the stock finished largely flat, the performance underscores the retailer’s reliability and strength relative to peers. The company delivered another solid set of results, outpacing virtually every major U.S. retailer in a challenging environment.

Amid heightened inflation pressures, Costco’s comparable sales rose 6.7% after adjusting for fuel price fluctuations and currency effects. Quarterly revenue climbed 11.1% to $95.7 billion, exceeding the consensus forecast of $94.89 billion.

Earnings per share increased 15% to $6.75. The results included a $0.15 per‑share benefit from tariff refunds, equivalent to roughly $70 million.

Membership fee revenue grew 7.3%, marking the third consecutive quarter of slower growth in this segment. Nonetheless, Costco is still adding members and continues to leverage its three core growth drivers: new memberships, same‑store sales, and additional store openings.

Digital commerce sales surged 19.5%, reaffirming the strength of Costco’s online platform.

Image source: Getty Images.

Costco vs. Walmart

As the leading warehouse club, Costco lacks a direct rival, but Walmart—through its Sam’s Club channel—serves as its closest peer. Both retailers derive a large portion of revenue from groceries and compete in the broader national, multi‑category retail space alongside Target and Amazon. Walmart has successfully reinvented itself over the past decade, emerging as the second‑largest e‑commerce operator after Amazon and attracting higher‑income shoppers while maintaining low prices. However, the most recent quarter revealed a slowdown: Walmart’s comparable sales rose just 2.6%, the slowest growth in six years. After accounting for new federal drug‑price caps that impacted pharmacy sales, comparable sales were up 3.4%. The company cited higher gas prices and reduced discretionary spending as headwinds.

Costco’s recent comparable‑sales growth was more than double Walmart’s, highlighting its resilience during a period when many retailers are struggling with inflation and shifting consumer behavior. The warehouse club’s focus on higher‑income members, who are less price‑sensitive, together with a robust membership model and continued store expansion, gives it a competitive edge.

Costco earns its premium

Costco trades at a premium valuation, with a price‑to‑earnings ratio of roughly 43—higher even than Amazon’s. Walmart’s P/E stands at about 39. Despite the higher multiple, Costco’s business model remains among the most durable in brick‑and‑mortar retail. The company continues to open new locations and operates fewer than 1,000 stores globally, indicating ample room for expansion, especially in markets such as Canada and China where demand is strong. After navigating both the pandemic and the post‑pandemic recovery, Costco continues to deliver solid top‑ and bottom‑line growth while other retailers face headwinds. Investors may need patience for the stock to fully justify its valuation, but the long‑term outlook remains compelling.

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