Costco vs Walmart: Which Retail Giant is Outperforming?

Costco's (COST) fourth-quarter earnings report on September 24 beat expectations at $6.75 per share, thanks in part to a tariff refund of $0.15.

The company saw comparable sales rise by 9.4% and membership income reach $1.85 billion, with renewal rates near 90%. However, its growth in membership fees has slowed down compared to Sam's Club, which grew at 11.3%, more than double Costco's rate of 7.3%.

Walmart (WMT) is growing its own membership income at a faster pace, with a 17% increase in the quarter, despite being a delivery subscription rather than a warehouse club like Costco and Sam's Club.

The gap between Walmart and Costco has narrowed significantly, with both trading near 40 times their past year's earnings. Costco's premium is largely justified by its membership fees, but if it fails to reaccelerate next quarter, the justification for its higher price may be lost.