COST vs WMT

Key Takeaways

• Costco delivered 7.5% revenue growth and a record $4.04 EPS, outpacing Walmart’s 6% sales rise and $0.60 adjusted EPS.
• Both retailers posted strong e‑commerce gains—Costco +13% versus Walmart +21%—but Walmart’s Marketplace seller base expanded 36%, widening its margin profile.
• Costco’s membership fee hike boosted fee revenue by 8%, while Walmart’s membership programs (Walmart + and Sam’s Club Plus) generated record member counts and higher renewal rates.
• Operating income grew faster than sales for both companies: Costco’s adjusted operating margin rose 42 bps; Walmart’s adjusted operating income surged 12.9%.
• Inventory positions improved for both, with Costco’s global inventory down 2.7% and Walmart’s U.S. inventory falling ~4%.
• Tickeron’s AI models favor the stock with more consistent margin expansion and stronger cash conversion—currently Walmart.

Introduction

The giant warehouse club Costco Wholesale Corporation (COST) and the world‑leading omnichannel retailer Walmart Inc. (WMT) dominate the discount‑shopping landscape in the United States and abroad. Comparing these two stocks is valuable for value‑oriented investors, growth‑focused traders, and analysts who track consumer‑spending trends. Both companies reported first‑quarter results for fiscal 2025 within the past 30 days, offering fresh data on sales, e‑commerce, membership dynamics, and profitability that illuminate their competitive positioning.

COST Overview and Recent Performance

Costco operates a membership‑only warehouse model. In the most recent quarter, net sales reached $62.15 billion, a 7.5% rise year‑over‑year, driven by a 5.2% comparable‑sales increase and a 13% jump in e‑commerce sales (excluding gasoline price effects). The company recorded net income of $1.80 billion, translating to $4.04 earnings per share (EPS) on a diluted basis, comfortably above analysts’ $3.79 consensus. A modest 8% hike in annual membership fees added $1.17 billion to revenue, reinforcing the “membership‑driven” profit engine.

Operationally, total global inventory fell 2.7% while traffic rose 5.1%, indicating efficient stock management and strong member engagement. The average ticket remained flat, but the rollout of new product categories—such as premium Kirkland Signature items and a record‑setting bulk‑tire marketplace—expanded the value proposition. Costco’s cash flow remained robust, with operating cash generation of $3.26 billion, supporting its historically low leverage and continued dividend growth.

WMT Overview and Recent Performance

Walmart’s fiscal‑year‑2025 first quarter posted consolidated revenue of $161.5 billion, up 6% YoY, and adjusted operating income climbed 12.9% to $9.5 billion, reflecting a 42‑basis‑point (bps) gross‑margin expansion. Adjusted EPS of $0.60 beat the $0.49–$0.52 guidance range. E‑commerce sales surged 21% globally, propelled by a 22% increase in Walmart U.S. online traffic and a 36% rise in Marketplace sellers, now offering over 420 million SKUs.

Advertising revenue grew 24% (U.S. Walmart Connect up 26%), while membership income rose as Walmart + and Sam’s Club Plus achieved record enrollment and renewal rates. Inventory in the United States declined about 4%, supporting lower markdowns and healthier in‑stock levels. The company’s cash conversion remained solid, with $4.25 billion of operating cash generated, despite modest free‑cash‑flow pressure from continuing capital expenditures.

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Head-to-Head Comparison

• Business Model: Costco relies on a pure membership model with limited SKU breadth, emphasizing bulk pricing; Walmart blends low‑price retail with a massive e‑commerce platform and a diversified Marketplace.
• Growth Drivers: Costco’s growth is anchored in membership fee increases and expanding private‑label depth, while Walmart’s surge stems from Marketplace seller expansion, advertising, and subscription services.
• Margin Trends: Costco’s gross margin improved modestly (42 bps) due to lower markdowns; Walmart’s margin boost was larger, aided by high‑margin ad sales and a shift toward higher‑margin Marketplace fulfillment.
• Risk Factors: Costco faces exposure to membership‑fee elasticity and supply‑chain constraints on bulk items; Walmart must manage integration risk from rapid Marketplace growth and price‑competition pressures across its vast product mix.
• Sector Exposure: Both operate in Consumer Defensive, yet Walmart’s broader geographic footprint (19 countries) adds currency‑risk variability, whereas Costco’s concentration in the U.S. and Canada offers steadier earnings.
• Market Sentiment: Analyst sentiment currently favors Walmart for its higher upside from ad‑tech and membership expansion, while Costco enjoys a premium valuation due to its consistent cash generation and lower leverage.

Tickeron AI Verdict

Based on recent data, Tickeron’s AI models assign a higher probabilistic score to Walmart (WMT) for the next 30‑day horizon. The rationale centers on Walmart’s faster operating‑income growth relative to sales, its expanding high‑margin advertising and Marketplace businesses, and stronger cash‑flow conversion despite a larger balance‑sheet footprint. Costco (COST) remains a robust performer with superior member retention and disciplined inventory, but its slower margin expansion and reliance on a single revenue driver (membership fees) temper the AI’s near‑term outlook. Consequently, the AI leans toward Walmart while still recognizing Costco as a high‑quality, lower‑volatility hold.

Disclaimer

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