How Sam’s Club Stacks Up Against Costco

By Paul Ausick Updated Jan 12, 9:02AM EST · Published Aug 17, 2:07PM EDT

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How Sam’s Club Stacks Up Against Costco — © Thinkstock

When Wal-Mart Stores Inc. (NYSE: WMT) reported fiscal second-quarter results Thursday morning, a noticeable laggard appeared in the results of the company’s three segments. Operating income at the company’s Sam’s Club stores dropped 14.4% to $404 million.

At Costco Wholesale Corp. (NASDAQ: COST), the company reported fiscal third-quarter results in May, including operating income of $968 million, up nearly 13%. Revenues for the quarter totaled $28.86 billion, including $644 million in membership fees.

Same-store sales at Costco rose 5% in the May quarter and got a boost from both shopping frequency and a higher average ticket per sale.

Walmart reports membership fees in a line item that includes other income. In the second quarter that totaled $1.41 billion of total corporate revenues of $123.36 billion. Sam’s Club revenues totaled $14.88 billion, a gain of 2.3% year over year. Compared to the same period last year, same-store sales rose 1.4%, including a 0.2% boost from fuel sales.

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On a corporate level, Walmart’s gross margins dipped 5% and the margin at Sam’s Club stores fell by 30 basis points, which the company attributed to an accounting change that reclassified some items from operating expenses to cost of goods sold. Gross profit also suffered from an investment in cash rewards, higher shrinkage and increased shipping costs from the Sam’s Club website. Walmart reported a corporate gross profit rate of 25%, based on cost of sales of $91.52 billion. Operating expenses rose by 10 basis points to 21.2% as a percentage of net sales.

At Costco, gross margins rose by eight basis points to 11.51%, with a cost of sales total of $24.97 billion and SG&A expenses of $2.91 billion.

Sam’s Club sales are roughly half as much as Costco’s, and Costco’s profits are more than double those of Sam’s Club. Worse for Sam’s Club, its operating profit fell by a double-digit amount in the quarter, while Costco’s rose by a double-digit total.

Costco operated 729 stores at the end of its May quarter, with 508 located in the United States and Puerto Rico. Sam’s Club operates 659 stores in the United States and Puerto Rico.

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About the Author Paul Ausick →

Paul Ausick has been writing for a673b.bigscoots-temp.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.