Which US Supermarket Chain Leads the Retail Race? WMT vs COST Stock Showdown

When it comes to US supermarket chains and retail dominance, two names consistently dominate investor conversations: Walmart Inc. [WMT] and Costco Wholesale Corporation [COST]. Over the past year, their stock performance has told a fascinating divergence story—Walmart rallied 19.7% while Costco declined 10.8%—but the longer-term investment case remains nuanced. Let’s dig into what’s actually driving these giants and which might be the better play right now.

Stock Performance & Valuation: The Mixed Picture

Before diving into business models, the numbers tell an interesting story. Walmart currently trades at a forward P/E of 38.19 (slightly above its one-year median of 35.98), while Costco sits at 41.38—notably below its historical median of 49.44. Translation: despite Costco’s recent stock weakness, it’s actually trading at a discount to its own norms, whereas Walmart is trading at a premium.

Recent analyst consensus suggests divergent growth trajectories. For the current fiscal year, Walmart’s EPS is expected to grow 4.8% year-over-year, with next-year growth accelerating to 11.6%. Costco, meanwhile, is tracking 11.7% current-year EPS growth, decelerating to roughly 9% next year. Both US supermarket chains remain Zacks Rank #3 (Hold), reflecting balanced risk-reward profiles.

The Walmart Case: Speed, Scale & Margin Expansion

Walmart’s investment thesis rests on three pillars. First, its sheer scale—over 10,750 stores worldwide, hundreds of millions of weekly customers, and $884.2 billion market cap—creates unmatched pricing power and logistics efficiency. The company has weaponized this through omnichannel infrastructure, with stores serving as fulfillment hubs for rapid delivery.

The numbers here are compelling. U.S. e-commerce grew 28% in Q3 FY2026, with 35% of store-fulfilled orders hitting customers within three hours. Digital sales overall jumped 27% globally. But here’s the kicker: Walmart is systematically shifting toward higher-margin revenue streams. Walmart Connect advertising, Walmart+ membership fees, and improved marketplace economics now comprise roughly one-third of consolidated adjusted operating income. This represents a fundamental business model evolution—less dependence on thin retail margins, more recurring, profitable revenue.

Technology investments in AI, automated distribution, and supply-chain digitization are reinforcing this advantage. International operations in Mexico, China and India provide additional diversification and growth optionality. The risk: thin retail margins persist, tariff exposure looms, and lower-income consumer spending remains choppy. Execution matters.

The Costco Advantage: Membership Stickiness & Operational Discipline

Costco’s strength flows directly from its membership-based model. Unlike traditional retailers, Costco generates a steady stream of high-margin membership fees—a business model that provides earnings stability regardless of merchandise sales fluctuations. Renewal rates remain robust, signaling genuine customer loyalty and perceived value.

The operational playbook is disciplined. Limited assortments, bulk purchasing power, and a highly efficient supply chain enable Costco to maintain competitive pricing while protecting margins. Recent data shows this working: digitally enabled comparable sales rose over 20% in Q1 FY2026, driven by website and app engagement. Importantly, Costco isn’t replacing in-warehouse shopping with digital—it’s extending the model. Same-day delivery partnerships and pre-scan technology improving checkout speeds exemplify this approach.

The margin story for the membership giant is less glamorous than Walmart’s. Wage inflation, logistics expenses, and technology investments could compress near-term profitability. Discretionary item demand also fluctuates with consumer spending cycles. Yet the model’s durability remains its greatest asset. With a $380 billion market cap and consistent execution, Costco appeals more to long-term wealth compounders than momentum chasers.

Comparing the Two: Scale vs. Efficiency

Here’s the real distinction among these US supermarket chains: Walmart pursues dominance through scale and platform diversification (advertising, membership, marketplace); Costco achieves competitive advantage through operational discipline and customer lock-in (membership renewal). Walmart’s 900+ warehouses for Costco contrast sharply with Walmart’s 10,750+ stores across multiple formats.

For growth investors prioritizing near-term momentum and earnings diversification, Walmart’s e-commerce acceleration, advertising platform expansion, and margin improvement trajectory feel more compelling. For those seeking stability and compounding returns, Costco’s membership moat, operational efficiency, and below-median valuation multiple remain attractive.

The Bottom Line

Both remain formidable retailers, but they serve different investor appetites. Walmart edges ahead for those seeking momentum, faster growth and accelerating profitability from higher-margin businesses. Costco holds its ground for disciplined, long-term wealth builders unbothered by near-term volatility. Neither is a clear “avoid,” but your timeline and risk tolerance should determine which US supermarket chain champion fits your portfolio.