Neil Patel, The Motley Fool

Sun, Jun 8, 2025, 3:15 AM5 min read

• Costco is humming along, with solid improvement in same-store sales, membership, and new store openings.

• Recently, Home Depot has dealt with a demand slowdown, but some factors could start to work in its favor.

• 10 stocks we like better than Costco Wholesale ›

When it comes to massive retailers, perhaps two of the businesses that immediately come to mind are Costco Wholesale (NASDAQ: COST) and Home Depot (NYSE: HD). The former specializes in selling bulk quantities of general merchandise, while the latter focuses on home improvement goods. Shares of both companies have been monster winners in the past four decades.

The economic picture might look a bit gloomy. But that isn't stopping you from allocating capital to this sector. Which of these top retail stocks is the better buy right now?

Costco's financial results make you forget that the U.S. is in the middle of an unprecedented trade war, soft consumer confidence, and record levels of credit card debt. During the fiscal 2025 third quarter (ended May 11), total revenue was up 8% year over year. This was supported by a 5.7% gain in same-store sales, which itself was boosted mainly by higher foot traffic.

This points to the clear value proposition that shoppers see. And it makes complete sense why. Costco provides extremely low prices on high-quality goods in a no-frills environment. It has immense buying power that allows it to obtain favorable pricing on merchandise for its warehouses. This directly benefits shoppers.

The customer base keeps growing, with about 5 million net new cardholders joining in the past 12 months. Costco also benefits from loyalty, as the membership renewal rate was 92.7% in the U.S. and Canada. The business should prove resilient should economic conditions deteriorate, given consumers' ability to handle all of their shopping needs in one stop and in a budget-friendly manner.

This is a massive enterprise. However, the growth story isn't over. Costco plans to end fiscal 2025 having opened 24 net new warehouses. The plan is to expand the physical footprint by about 25 to 30 new stores each year going forward, with plenty of opportunity both in the U.S. and internationally.

Home Depot hasn't been navigating the economic situation that well. Higher interest rates pressure the housing market. And inflationary pressures, as well as general uncertainty among consumers, don't bode well for expensive renovation projects. This explains why Home Depot's same-store sales declined 3.2% in fiscal 2023 and 1.8% in fiscal 2024. On a bright note, this key metric is expected to rise 1% this fiscal year, according to management.