As the holiday shopping season approaches, two retail giants, Amazon and Costco, are showing strong sales momentum. Amazon's fourth quarter is typically its busiest, and last year's holiday sales surged 18% compared to the third quarter. This year, Amazon's sales growth has accelerated, reaching 20% in the second quarter, though the shift of Prime Day to June impacted the third quarter's outlook. Despite a 2% rise in October, Amazon's stock remains about 11% below its August record high of $284.02, trading near $254.
Costco, meanwhile, is entering the holidays with even faster sales growth. Comparable sales, excluding gas prices and foreign exchange, climbed 7.6% in September, outpacing last year's holiday quarter. Costco's fiscal first quarter ends just before Thanksgiving, making its monthly sales reports the first indicator of holiday performance. While membership fees contribute significantly to Costco's operating income, the company's stock has risen around 8% in October, nearing $1,000.
Analysts view Amazon as the better buy at its current price, trading at about 24 times earnings based on 2027 estimates. Costco's stock, however, is priced at around 47 times earnings, reflecting expectations of steady growth. The article suggests buying Costco in smaller increments rather than a full stake at its current price.