How Walmart Is Crushing Costco
This article is more than 2 years old
Two retail giants have taken Wall Street news by storm in recent months. Walmart and Costco managed something most major companies have failed to accomplish this year. And that is achieving financial success.
In a year with companies posting record revenue losses and seeing their stock values plummet, you are hard-pressed to find examples of successful endeavors. However, both Walmart and Costco are poised to finish the year strong.
But what is even more surprising is which of these retailers is pulling ahead. It is a little difficult to compare the two head to head. After all, they target completely different demographics.
Walmart shoppers tend to be price-conscious (of any demographic). It has more retail locations, making it ideal for regular grocery trips and spur-of-the-moment shopping. Plus, the company is expanding its online presence to directly rival Amazon.
On the other hand, Costco’s shoppers tend to be slightly more affluent. And they need to drive (sometimes hours) to reach one of the warehouses. Additionally, the company appears to value in-person experience over online shopping.
So, can you really compare them? You can. And 24/7 Wall St did.
Let’s start with comparable store sales. In the latest earnings report, Costco showed outstanding numbers in this category. They reported a whopping 13.5% increase.
Unfortunately, that number has consistently fallen since then. It was “8.5% in September, 6.0% in October and 4.3% in November.” And that is not good news for the warehouse company.
However, Walmart showed a steady increase in comparable store sales, coming in at 8.2%. So, they clearly have the upper hand in this category. But what about overall revenue?
According to the most recent earnings report, Costco’s revenue increased by 15.2% to an impressive $80.76 billion. Unfortunately, that bump did little to the company’s bottom line. It remained relatively flat.
On the other hand, Walmart saw a revenue bump of 8.7%, reaching $152.8 billion. While this is good in theory, the retail giant also had to pay off a $3.1 billion legal settlement. And that meant a $1.8 million hit to the bottom line.
So far, that puts the two companies relatively neck and neck in the race. But that is before we take a look at the online sales category. This area is where Walmart really shines.
Their e-commerce sales soared by a staggering 16%. That is phenomenal news for the company that hopes to one day challenge Amazon. And it helped improve their overall financial performance.
Unfortunately, since Costco does not put nearly the same emphasis on its e-commerce sales, it did not see comparable improvements in this category. “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%.”
Yes, you read that right. In our increasingly digital world, Costco lost e-commerce sales. A company cannot do that these days and hope to remain competitive.
And that drastic drop, combined with its declining comparable store sales numbers, left Coscto’s stocks in the lurch. “So far this year, Walmart’s shares are up over 5%, while Costco’s are off nearly 13%.” It will be interesting to see how both retailers finish the year out.
