Is Costco’s Substantial Premium Valuation Over Walmart’s Justified?
https://seekingalpha.com/article/4536063-is-costco-stock-sub…
I own and shop at both Costco and Walmart. Once in a while I even shop at a regular Walmart store. So while the graphs presented in the article are interesting they don’t change much of anything for me. I prefer Costco over Sam’s Club even though I pay the higher membership there.
And when it comes to regular stores I would go to Walmart before Target.
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I think your article writer missed the biggest difference between Costco & Walmart (although I admit to skimming the piece over dinner.)
WalMart has almost 5,000 stores (discount + super center) in the US, while Costco has barely 800. It seems unlikely that Walmart will continue to grow at much beyond the general growth of the population and/or economy, while Costco has a large market waiting for a store somewhere nearby.
I realize that Costco is, to some extent, cream skimming: choosing the places with the most desirable demographic, highest income, etc. (and good for them) but at some point it’s time to start exploring the wilderness outside their self-induced bubble.
As an example, I live in Knoxville, TN. We have one Costco. Within 15 minutes of my house there are two Walmarts (and three Targets) and a Sam’s, and within 30 minutes, five Walmarts and two Sam’s. There is a smaller city up the road, Maryville, with two Walmarts and zero Costco’s. Honestly, nobody is going to drive from Maryville to Knoxville to shop at Costco, given the admission fee, and few are going to drive from the other side of the city to the Western Suburbs where the Knoxville Costco is located either.
(I am not advocating growth at any price, but I think they could afford to pick up the pace a bit.) I’ve been with Costco for almost 20 years, even before they had a single store here (Whole Foods and Trader Joe’s were here before them) and judging from the overstuffed parking lots and lines at the registers there’s so much demand it seems unlikely that opening another would cannibalize the mother store at all.
Simply put: Walmart’s prospects for growth are numbers-limited, while Costco can add many more stores and profits before saturation sets in.
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Honestly, nobody is going to drive from Maryville to Knoxville to shop at Costco, given the admission fee, and few are going to drive from the other side of the city…
The yearly admission fee doesn’t bother me a bit. Given the service/merchandise quality/prices I get for the money the yearly fee is a wash.
I gladly drive 19 miles each way to get to/from my local Costco even though there is a Walmart within walking distance of my house. We literally drive past a Walmart on the way to Costco.
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The warehouse retailer offers beloved items at discount prices, has a food court that’s earned a loyal social media following, and treats its employees with respect.
https://www.msn.com/en-us/foodanddrink/foodnews/5-reasons-co…
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PS Go to Costco around lunch time so you can get one of their loss leader hot dogs:
The Kirkland signature hot dogs sold at Costco are 100% beef and don’t have unhealthy additives and stabilizers like other more expensive brands in the market.
To assure you a clean bill of health, Costo hot dogs are free of:
Corn syrup
By-products
Phosphates
Fillers
Artificial colors and flavors
https://www.thehotdog.org/costco-hot-dog/
(You can buy packages of the same hot dogs in the Costco store to take home)
At $1.50 for a Costco hot dog and a large soft drink the Costco hot dog/drink is not only a bargain, it’s healthy*!*
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I agree with desertdave. Costco rules. I would have said that even before I became a shareholder.
In my case, we have a Costco about 10 minutes away. Less if I make the lights. But when we do road trips, we often plan our fuel stops around Costco locations. Before I got my EV, Costco gas already saved us enough money to pay for the membership. With my EV, it’s not so dramatic now. But my two rebate checks more than pay for the executive membership (usually 2-3x).
Walmart? Almost never go in there. Their stuff isn’t nearly as good as Costco. Same for Target (not as good).
I also occasionally read about locales that are screaming for Costcos. Meanwhile, people protest when a Walmart is going to move in.
Every so often some writer opines about Costco valuation. But Costco keeps delivering results for the shareholders, so I mostly dismiss those writers. If Costco stops delivering results, I’ll revisit my investment. It’s not a Saul stock, but it’s a consistent juggernaut, and one of my best stocks over time.
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Walmart? Almost never go in there. Their stuff isn’t nearly as good as Costco. Same for Target (not as good).
It depends on what I’m buying. I probably get to Costco every week or ten days, it is very much a regular thing. I have my regular purchases, and I check out the other stuff for anything interesting. But a few weeks ago I wanted a dishpan, not the sort of high turnover product Costco sells. So I dropped into Walmart, found the one thing I wanted without taking time to check anything else out, and that was it.
My local Costco here in Connecticut is the largest in the state. Recently I’ve been to two in other states, Michigan and Georgia. They are huge compared to mine!
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We are in the process of looking for a new location to live in, giving up on central VA as too hot/humid. Must haves include a Costco and a Trader Joes, among other things.
Like everything else they sell, Costco memberships are returnable. 100% refundable, even if returned on the last day. That promise was how I got convinced to re-up my membership last time we thought we were moving, and didn’t think there was a store near us.
IP
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There are fewer of them, but if you can get close to a Costco business center, that can be useful. They cater to businesses, but all members are welcome. Lots of kitchen/restaurant stuff, plus some bulk items they don’t usually carry in their warehouses.
The only one in Phoenix is on the west side (I’m east valley). So it’s a trek. We make it usually once or twice per year. You can buy a 40# box of chicken thighs, for example. When we do, we divide it up into gallon ziploc bags, and freeze it. They also usually have a complete goat or sheep in a freezer, for anyone who wants one. Already cleaned and ready for grilling. 
1poorguy
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Sounds interesting!
I hadn’t heard about Costco Business Centers before so I went on their web site and checked that box in the store locator. The nearest one is two states (and two plus hours) away in New Jersey (with NY City in between). Second closest is in Chicago! It shows the nearest ten; the tenth is in Phoenix.
I’m not sure if they stock goats, but there is a Restaurant Depot next to my Costco, and my son-in-law has the card because he is involved in throwing a big shindig once a year. A couple of times I’ve picked up large boxes of already cooked chicken cutlets to make chicken Parmesan (cheese from Costco).
…we divide it up into gallon ziploc bags, and freeze it.
Have you considered investing in a vacuum sealer? Getting all the air out can help preserve things better. The basic model I have is on special at Costco thru 8/28/22; 25% off, so $75.
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We make it usually once or twice per year.
Hmmm, we go once or twice a week…for the two of us. As I said, proximity to a Costco is important.
IP
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For the ordinary warehouse, we go every few weeks (on average…sometimes weekly, something not for a month). But the business center we only go once or twice a year.
We got our sheet pans from the business center, as well as a skillet set, and food handler gloves, and their chorizo is really good. We bought a brisket there once…I think it was something like 20#. Cut it up, froze some, smoked some.
If you want to stock your freezer, the business center is great. But, as the other poster mentioned, they aren’t in every state.
1poorguy
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Anyone know how Costco decides where to put one of their stores? It’s not the Burger King model of putting one somewhere near a Sam’s Club because I’m in the Hudson Valley, NY and we’ve got a Sam’s Club but no Costco anywhere nearby. With the consistent influx of new former-NYC residents moving to the area I’d think we’d be prime for a new supercenter. But what do I know?
Cheers,
SD
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Smurfdogg, some times they want a good location, it might even be available. Right up to the time the local people and unions start complaining about any number of things they consider detrimental to them. And they can keep it for years until they or Costco give up.
I’m lucky that I have one 6 miles away and another less than 15 miles away. Each is in a different town and my town is in between them.
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Anyone know how Costco decides where to put one of their stores? It’s not the Burger King model of putting one somewhere near a Sam’s Club because I’m in the Hudson Valley, NY and we’ve got a Sam’s Club but no Costco anywhere nearby. With the consistent influx of new former-NYC residents moving to the area I’d think we’d be prime for a new supercenter. But what do I know?
I’m sure many factors go into it, but I think demographics is the key. They target prosperous people as members, so an area where the people are well off has an edge. A good location near highways seems very important too.
If you have someplace that looks good to you, they solicit suggestions on their web site!
https://customerservice.costco.com/app/answers/detail/a_id/1…
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