Demitri Kalogeropoulos, The Motley Fool

Sun, Jun 15, 2025, 4:00 PM4 min read

• The retailers are both priced at a premium compared to peers.

• Costco will appeal to more growth-focused investors, while Walmart delivers higher profits.

• 10 stocks we like better than Costco Wholesale ›

Owning Costco (NASDAQ: COST) or Walmart (NYSE: WMT) stock today might seem risky, given the uncertainty around tariffs and economic growth. Retailers are among the first to notice when consumers are pulling back on spending, often by trading down to cheaper brands and limiting discretionary purchases. Yet, these two retailing giants have proven that they can maintain customer traffic through a wide range of selling conditions. Their sales often do better, in fact, when shoppers are looking to save money.

Those factors help explain why both Costco and Walmart stock are outperforming the market so far in 2025. But which one is the better fit today? That depends on your preferences around value, cash returns, and growth potential. Let's take a closer look.

Costco is the clear leader in terms of revenue growth. Comparable-store sales rose 8% last quarter, with Walmart's gain clocking in at 5%. Zoom out, and the picture doesn't change. Costco expanded sales by 8% over the last three quarters, and Walmart notched a 5% increase in fiscal 2025. The warehouse retailing titan's lead is driven by factors like its loyal base of subscribers and a merchandise strategy that spans the entire pricing range (from $1.50 hot dogs to gold bars selling for $3,400).

The profit picture isn't as clear-cut. Costco's profitability is unusually steady for a retailer because it is mostly powered by those highly predictable membership fees. As a result, an investor who doesn't like to see large earnings declines might prefer this stock.

Walmart lacks that stability, but in exchange, you get a higher overall margin (4.3% today). The retail giant is also boosting its profitability through initiatives like its booming e-commerce business and its digital advertising push. It's more likely to see Walmart's margin increase over the next few years than Costco's, whose management team is committed to reinvesting excess cash into keeping prices low.

Dividend investors will have a tough time choosing between these two stocks. While Costco and Walmart both generate ample free cash flow, neither stock will wow you with its yield. Walmart's shares deliver a roughly 1% yield, and Costco's yield is a meager 0.5%. You'd do much better by simply owning an index fund that tracked the wider S&P 500.