Warehouse clubs and juicy burgers have little in common, and this became painfully clear when the pandemic hit home. Costco's (NASDAQ:COST) retail outlets remained popular during the early stages of the COVID-19 outbreak. It was an essential business. Shake Shack (NYSE:SHAK) went the other way with sales plummeting during the first few weeks of the normal. Its burgers, frozen custard treats, and crinkle-cut fries are delicious -- but not essential.

Pitting Costco against Shake Shack doesn't seem fair at first glance. However, as two players that are growing in their fields -- Costco with its empire of warehouse clubs and Shake Shack with its "better burger" fast casual concept -- it's a fight that belongs on the menu. Let's see which stock is the better buy at current levels.

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Image source: Getty Images.

Shack attack

Things are improving at Shake Shack these days, but it's all relative. The chain that got its start nearly two decades ago as a hot dog cart at New York City's Madison Square Park was one of the hardest-hit eateries in the pandemic. It has a long way to go before it's back where it used to be.

Shake Shack stores that remained open through the darkest stretches of the COVID-19 shutdown closed their dining rooms. The chain relied on delivery and take-out to keep paying the bills, and it wasn't pretty. In its roughest week -- the seven days ending March 25 -- comps plummeted 73%.

The trend is improving, but painfully so. In a business update earlier this month Shake Shack revealed that comps declined 64% in April, 42% in May, and 42% in June. Same-store sales fell 39% for the week ending on July 1, the first of its new fiscal quarter. The good news is that as bad as this all seems cash flow is now positive at the unit level. Shake Shack itself is at an enterprise-level weekly cash burn of $200,000.

Bulk savings

Costco is faring a lot better. Its universe of 788 warehouse clubs has remained open through the crisis. Many of its departments -- like its food court, photofinishing, eye care, and travel -- were limited if not outright closed initially. Comps declined for the first time in more than a decade for the month of April, but there was more to the end of that winning streak than meets the eye. Comps would've been flat in the U.S. if you back out the slump in gasoline sales. 

Costco bounced back quickly. Comps rose 9.7% in May, accelerating to an 11.1% increase for June. Costco is doing right by its shareholders, and it was even able to hike its quarterly dividend earlier this year. 

So is Shake Shack and Costco a fair fight? Costco is going to take the lead on valuation with its more reasonable multiples. Shake Shack can't be discounted, especially now as it's clawing its way back and starting to develop new locations again. However, this battle isn't even close. Costco is the better buy. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.