Costco (NASDAQ:COST) and Walmart (NYSE:WMT) have been standouts in retail over the past several years. Undoubtedly, both retail behemoths have leveraged their economies of scale to delight loyal customers with better deals amid the inflationary climate. Indeed, if you’re not a well-run retailing colossus, it can be tough to stay competitive on pricing, especially as everything from labor to raw materials has been rising in price in recent years.

With size comes considerable leverage in negotiating pricing. And with the goal of maximizing value for customers, it should come as no surprise why the shares of both retail heavyweights have been hot of late. Even as inflation runs out of steam, the two retail juggernauts seem built to continue growing.

At the same time, for those looking to hedge against a sudden return of 2%+ inflation, the following names could be worthy bets, even at today’s frothy valuations. At the end of the day, these retail titans are trading at pricier multiples for a reason.

Though share-taking could be made tougher in 2025 as inflation winds down and consumers become less sensitive to pricing, I’d argue that the tailwinds at their back are more secular in nature. In short, both top-tier retailers are giving customers exactly what they want (value and convenience).

In this piece, we’ll examine the two firms to determine which is the better bet at today’s seemingly euphoric heights.

Key Points About This Article

• The retailing wars could get interesting going into 2025.
• COST and WMT stock are mega-cap standouts with what it takes to continue winning.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Costco

Costco stock is up 37% year to date, thanks partly to continued quarterly strength. At near all-time highs, the stock goes for just shy of 50 times forward price-to-earnings (P/E). That’s not cheap, but if you want best-in-class retail exposure, that’s the going price. Personally, I think the premium is a tad too rich, even as management continues serving up must-have discretionary goods.

Sure, Kirkland Signature is the brand that other private labels aspire to be. And while management seems to know how to keep customers coming in and filling up their jumbo carts, I must say I’m unsure whether the firm can continue its growth pace.

While Costco’s in-store experience is second to none, its e-commerce presence, I believe, is lacking compared to the likes of Walmart. If Costco were to bolster its digital platform, I’m sure its army of loyal members would take their spending into overdrive.

Either way, I think there’s too much optimism priced in right here, and I would rather wait for a pullback before backing up the truck.

Walmart

It’s hard to believe that shares of big-box retail heavyweight Walmart are up close to 60% year to date. That’s an unbelievable gain from a robust rally that’s showing no signs of slowing. At writing, the stock goes for 29.9 times forward P/E. From Walmart’s historical standpoint, that’s expensive. But for a well-run retailer that’s in growth mode, such a premium multiple may just be worth paying.

Increasingly, Walmart is showing that it’s willing to invest in technologies to offer customers a better omnichannel experience. Whether we’re talking about better in-store deals, the convenience of delivery, or the prettier in-store layout, Walmart is growing its fanbase fast. To keep the momentum going, Walmart needs to keep taking share from some of the more premier grocery retailers out there.

As the so-called “grocery wars” enter 2025, I think Walmart has the edge.

Why? It’s getting aggressive with its price cuts, and should consumers have a bit more cash in their wallets, Walmart has an opportunity to sell them on goods outside of the grocery aisle. Notably, it’s the upper-middle-class consumer that may be key to Walmart stock’s next leg of growth. Gone are the days when Walmart was just a low-cost retailer for working-class Americans.

In 2025, we’ll see how far the “premiumization of Walmart” takes the stock. I think more upside could be in the cards, especially as it offers shelter from what could be a rebound in inflation.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.