What's not to like about Costco (NASDAQ:COST)? It's a Rule Breaker in large-cap clothing, an innovator within a truly mature industry.

Speaking of industries, retailing can be a brutal one. Margins are tight, the whole sector is very sensitive to the mood swings of fickle consumers and an unstable economy, and if your store doesn't have what it takes, your customers can just go to the nearest Wal-Mart (NYSE:WMT) or Target (NYSE:TGT) or mom-'n'-pop grocery store.

Wal-Mart addresses that risk with a cutthroat focus on cost-cutting, to the point where Hollywood makes movies about how evil the operation has become. But it doesn't have to be that way. Costco is showing us how you can make a buck in retailing without getting a bad rap.

CEO Jim Sinegal and Chairman Jeff Brotman have been with the company since they started it, 14 years ago. Their personal relationship to this company shows through in the way they treat employees and customers. For example, the average Costco employee makes about 40% more per paycheck than the Wal-Mart equivalent, and they enjoy better benefits. Happy store workers take good care of the customers, who then turn happy as well and recommend the store to their friends.

Beautiful, huh? It's like the traditional retailing model turned inside-out. Costco attracts a spendy high-end consumer crowd to its warehouse stores, where they shell out money on high-quality, big-ticket items for a lower price than normal retailers charge.

So how's that working out for the Washington state-based retailer? Let's compare the company with Wal-Mart's Sam's Club segment and with BJ's Wholesale (NYSE:BJ) on a couple of salient points:



Y-O-Y Revenue Growth


Y-O-Y EBIT Growth
















Figures in billions of dollars for the last completed fiscal year.

Costco is the market leader in terms of sales, sales growth, and operating-profit growth. And there's still plenty of room for expansion. With just 383 warehouses in the nation, the company has a while before it reaches the number of Sam's clubs nationwide.

I could go on, but let's save some ammo for the rebuttal. The story so far: Costco has superior management, a corporate culture worthy of praise and emulation, and a highly effective growth engine. Larry?

Check out the other arguments in this Duel, and then vote for a winner.

Costco is a Motley Fool Stock Advisor recommendation, and Wal-Mart is a current Motley Fool Inside Value pick. Check out either service free for 30 days.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is always worth fighting for.