Costco Takes a Brutal Beating From Walmart

By Douglas A. McIntyre Published Dec 5, 10:30AM EST

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Costco Takes a Brutal Beating From Walmart — © opengridscheduler / Flickr

Costco Wholesale Corp. (NASDAQ: COST | COST Price Prediction) is not supposed to look anything like Walmart Inc. (NYSE: WMT). Its shoppers tend to be more affluent. It has fewer stores, which it claims are strategically located near its target customers. It charges an annual subscription fee, giving it recurring revenue that is not tied to month-to-month sales. However, there is an extent to which the big-box retailers such as Target compete for a large share of America’s shoppers because of their sustained ability to offer discounts and the size of their stores. Costco lags Walmart in this race by a large margin.
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In the most recently reported quarter, Costco’s revenue rose an impressive 15.2% to $80.76 billion. This did not translate into as much of an improvement on the bottom line. Earnings reached $4.21 per share, up 11.9%. Comparable store sales rose an impressive 13.7%. Costco’s figures after the earnings release were less impressive. Comparable store sales rose 8.5% in September, 6.0% in October and 4.3% in November. Is it any wonder Costco’s shares have sold off in the past three months? (Over the same period, Walmart’s share price has risen).
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Costco’s worst problem is that online sales improvements lag substantially behind in-store sales. In a world where every retailer competes with Amazon, Costco’s online figure dropped 10.1%.
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In the most recently reported quarter, Walmart’s revenue rose 8.7% to $152.8 billion, an extraordinary improvement for America’s largest company based on revenue and headcount. Comparable store sales rose 8.2%. Walmart raised its full-year outlook. A $3.1 billion opioid sales settlement crippled the bottom line. Walmart lost $1.8 billion.
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The strength that stood out most to investors is that e-commerce sales increased by 16%. Walmart is not Amazon, but it is getting closer.

So far this year, Walmart’s shares are up over 5%, while Costco’s are off nearly 13%. That speaks for itself.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.