Costco Wholesale Corporation (NASDAQ:COST) reported fourth-quarter results on September 24. Earnings came in at $6.75 a share against a consensus near $6.55. About $0.15 of that came from a one-off tariff refund, so the beat was narrower than the headline suggests. Comparable sales rose 9.4%.
The shares had eased 0.91% to $896.48 during the session before the numbers landed after the close, leaving them nearer the bottom of their twelve-month range than the top.
Walmart Inc. (NASDAQ:WMT) has spent years being the cheaper, slower alternative to Costco. That gap has narrowed to almost nothing. Costco trades near forty-five times its past year’s earnings and Walmart near forty.
READ ALSO: Jim Cramer Says Costco (COST) “Stock’s Acting Poorly”
Costco Sells Memberships and Uses Groceries to Renew Them:
Costco does not really make money on what is on the shelves. It sells memberships and keeps prices low enough that renewing feels obvious.
Those fees arrive before any product is sold and cost almost nothing to service, which is why they fall almost entirely to profit. In the fourth quarter, membership income reached $1.85 billion.
The loyalty behind it remains extraordinary. Costco now has more than 150 million cardholders and a worldwide renewal rate near 90%, and executive membership take-up reached an all-time high.
The quarter itself was strong by any measure. Comparable sales grew 9.4%, which is not the profile of a business losing its grip on customers.
DON’T MISS: Walmart (WMT) Bets On Streaming Ads. Can The Stock Catch Up?
Sam’s Club is Growing the Same Line Faster:
Costco’s membership income grew 7.3% in the quarter, slower than the double-digit pace earlier in the year. Walmart’s global membership income grew about 17% in the quarter it reported in August.
That headline figure is not a fair fight, because much of it is Walmart+, a delivery subscription rather than a warehouse club.
The two products do different work. One changes where a household shops for the week. The other buys faster delivery on things it was going to order anyway.
The fair comparison is Sam’s Club, and it does not rescue Costco. Sam’s Club membership income rose about 11.3% on sales up 13.9%, comfortably ahead of what Costco managed.
That matters because membership income is the entire justification for Costco’s premium. The closest thing to a true competitor is compounding that line half again as fast.
Walmart also has a second engine Costco has chosen not to build. Advertising and marketplace fees carry far higher margins than shelves do and are growing far faster than anything selling off them. That is a genuine second profit pool. Costco has the same opportunity and deliberately keeps it small, preferring to hand the value back as lower prices.
The counterpoint is dependability. Walmart’s growth is broader but more exposed to the ordinary consumer. Its shares fell sharply in August even after a quarter that beat expectations, because investors questioned the quality of the profit behind it.
Conclusion:
Costco remains the better business, with comparable sales growth intact, renewal near 90% and executive membership at a record. However, the line that justifies its premium grew 7.3% while Sam’s Club compounded the same line at about 11.3%. Part of the earnings beat came from a tariff refund that will not repeat, and investors pay forty-five times earnings against Walmart’s forty. On balance, Walmart is the better buy today, because it is growing the thing Costco is famous for while costing less. The number to watch is Costco’s membership fee growth next quarter. If it reaccelerates, the premium is defensible again.
Market Sentiment:
Costco Wholesale Corporation was held by 104 hedge funds with a combined stake value of about $11.6 billion at the end of Q2 2026 in the Insider Monkey database, down from 107 holders in the previous quarter. Walmart Inc. was held by 111 hedge funds with a combined stake value of about $11.1 billion, up from 99 holders in the previous quarter.
READ NEXT: Visa (V) vs American Express (AXP): Which is a Better Stock to Buy and Twilio (TWLO) Keeps Climbing as Investors Rediscover its AI Business
This article is originally published at Insider Monkey.
Hedge Fund Resource Center