As year-end retail performance shapes investor sentiment, Costco (COST) and Walmart (WMT) present divergent value propositions. Costco's premium model and consistent profitability contrast with Walmart's scale and evolving omnichannel strategy.
- Costco’s Q3 2025 revenue: $69.5 billion, up 9.4% YoY; operating margin: 4.9%
- Walmart’s annual revenue: $643.5 billion, up 3.1% YoY; net income: $20.8 billion
- Costco’s net margin: 2.4% vs. Walmart’s 2.1%
- Costco P/E: 22.3; Walmart P/E: 27.1
- Costco’s dividend growth: 14.3% CAGR over 5 years; Walmart: 8.7% CAGR
- Walmart’s free cash flow: $16.2 billion; Costco: $4.3 billion
Investors evaluating retail equities in late 2025 face a strategic crossroads between Costco Wholesale (COST) and Walmart Inc. (WMT), two titans with distinct operating models and growth trajectories. While both companies reported strong Q3 2025 results, their underlying financials reveal contrasting strengths and risks. Costco reported a 6.8% year-over-year increase in membership fees to $2.1 billion, contributing to a 9.4% rise in total revenue to $69.5 billion, with operating margin expanding to 4.9%. Walmart, meanwhile, posted $643.5 billion in annual revenue, up 3.1% from 2024, with net income of $20.8 billion, reflecting a modest 0.5% increase in operating margin to 5.2%. The divergence lies in profitability and customer engagement. Costco’s net margin of 2.4% exceeds Walmart’s 2.1%, driven by higher average ticket sizes and disciplined inventory turnover. This efficiency is reflected in a 22.3x price-to-earnings ratio for COST versus WMT’s 27.1x, suggesting market pricing reflects Walmart’s broader scale despite margin compression. Both companies maintain robust free cash flow: COST generated $4.3 billion, WMT $16.2 billion, with Walmart’s higher absolute figure stemming from its larger footprint and diverse business segments. Market sentiment, as reflected in analyst ratings, tilts toward Walmart with 72% of recommendations as 'Buy' or 'Strong Buy,' compared to 65% for Costco. However, Costco’s consistent dividend growth—14.3% annual increase over five years—outpaces Walmart’s 8.7% over the same period, appealing to income-focused investors. The geographic footprint also differs: Costco operates 962 warehouses globally, while Walmart maintains over 10,800 stores across 28 countries, including e-commerce platforms like Walmart.com and Jet.com. For investors, the choice hinges on risk appetite and time horizon. Costco’s premium membership model and margin resilience offer defensive appeal in uncertain economic climates, while Walmart’s massive scale and omnichannel expansion position it for long-term dominance in global retail logistics and digital commerce.