Owning Costco (COST 0.62%) or Walmart (WMT 0.76%) 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.
Growth and profits
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).
A customer shops for cleaning supplies. Image source: Getty Images.
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.
COST Operating Margin (TTM) data by YCharts
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.
Cash returns
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.
Costco has in the past rewarded investors with large one-time dividends, yet management hasn't committed to these, and the timing is always unpredictable when they do arrive. On the plus side, the retailers both produce enough cash to allow for direct returns like dividends and stock buybacks. If you're looking for a higher yield and predictably rising dividends, Walmart is the standout.
Price and value
There's a huge difference between these stocks in terms of valuation. Unfortunately, you won't be getting a crazy deal with either stock, since Costco and Walmart are each priced at significant premiums compared to other retailers such as Target or Kroger.
Between them, though, Walmart is cheaper, valued at 1 times sales versus Costco's price-to-sales ratio of 1.7. Similarly, you'd have to pay nearly 60 times earnings for Costco stock, compared to 41 times earnings for Walmart today.
Both retailers have earned these premiums by maintaining high shopper traffic through the years, dramatically expanding their e-commerce units, and consistently delivering low prices to their customers. Yet I believe Costco is the better stock to consider buying today. You get stronger growth and more stability with this business. Those are valuable factors in any market, but especially when volatility and uncertainty are on the rise.
