Costco Wholesale Corp.’s (NASDAQ: COST) share price has risen at a rate nearly double that of Wal-Mart Stores Inc. (NYSE: WMT) over the past year (27% and 14%, respectively). Its big-box approach to retail has outperformed that of America’s largest retailer. The story of the two has a lesson: being big is bad.

Wal-Mart’s revenue dwarfs Costco’s, which may be part of its problem. In the most recently reported quarter, Wal-Mart sales rose 2.3% to $118.1 billion. Net income hit $3.6 billion, or down 0.7% from a year ago. Same-store sales for Wal-Mart U.S. were up 0.5%. Wal-Mart’s results were dragged down by its international results, while Costco has a less substantial presence overseas. For the time being, that is an advantage. Wal-Mart’s overseas revenue was up only 1.7% to $33.7 billion. It has 5,044 locations overseas.

In its most recent quarter, Costco revenue rose 7% to $26.5 billion. Net income was up $496 million from $425 million. Costco’s U.S. store total is 474.

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Presumably, retailers put locations in the areas where they expect the most traffic. Being relatively small has an advantage based on that metric. Costco can pick the highest traffic areas. Wal-Mart has to spread itself more thinly. One argument analysts make is that Wal-Mart’s demographic profile includes more low-paid customers than Costco’s. To reach of all those people requires a bigger footprint. The consequences for Wal-Mart point to a yield per store problem. Support for that theory rests on the same-store sales of Wal-Mart U.S.

Looking back historically, perhaps Wal-Mart management 20 or 30 years ago may have made the mistake of being everything to everyone. Wal-Mart was founded in 1962. Costco was started in 1976. Sam Walton, Wal-Mart’s founder, captained its expansion. He may have made a poor decision on expansion, at least based on recent results.

However, 20/20 hindsight depends to some extent on how far back it is applied. Wal-Mart became the largest retailer in the United States because it had a lead, in terms of time. Some support to that point of view is the results of older retailers, including Sears, part of Sears Holdings Corp. (NASDAQ: SHLD), and J.C. Penney Co. Inc. (NYSE: JCP), which are each over a century old. The results have not turned out well for either.

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