As investors search for resilient retail stocks amid economic uncertainty, the debate intensifies: Is a balanced investment in Costco and Walmart a smarter move than betting on Dollar General and Dollar Tree?
With inflation, shifting consumer habits, and evolving business models reshaping the retail landscape, the answer hinges on both recent performance and future prospects.
Costco and Walmart, giants in the retail sector, have demonstrated remarkable staying power and adaptability. Over the past decade, Costco has delivered a staggering 667% return, more than doubling Walmart’s 275% gain. Both companies have also rewarded shareholders with consistent dividends and have shown resilience during inflationary periods, with Walmart’s shares only dipping 2% in 2022 despite soaring prices and interest rates.
Their ability to attract value-seeking consumers, expand e-commerce operations, and maintain operational efficiency has established them as defensive stalwarts in turbulent markets.
Costco’s membership-driven model underpins its stability, boasting renewal rates above 90% and a robust global expansion strategy. Its e-commerce sales surged 22.2% in the second quarter of fiscal 2025, and membership fee income continues to rise, providing a steady revenue stream.
Walmart, meanwhile, reported $681 billion in revenue for fiscal 2025, with U.S. comparable sales up 4.6% and e-commerce growth of 20%. Both companies’ scale and digital integration position them to weather economic headwinds and capitalize on changing consumer preferences.
In contrast, Dollar General and Dollar Tree, while historically favored for their discount appeal, have faced significant challenges. Both stocks have fallen over 40% in the past year, underperforming the broader market. Persistent inflation and a financially strained core customer base have pressured sales and margins.
Dollar General’s turnaround strategy—focused on store remodels and digital expansion—has shown some traction, but risks remain. Dollar Tree, despite recent outperformance and strategic divestitures, still contends with earnings volatility and competitive pressures.
While Dollar General and Dollar Tree trade at attractive valuations and have rebounded over 20% year-to-date, their recovery is fragile. The discount sector’s dependence on economically vulnerable consumers and limited e-commerce presence present ongoing risks.
For investors seeking stability, growth, and proven performance, a 50/50 split in Costco and Walmart offers a compelling blend of defensive strength and long-term upside. Their operational scale, digital momentum, and loyal customer bases provide a foundation for sustained returns, especially in uncertain times.
While Dollar General and Dollar Tree may appeal to value hunters willing to bet on a turnaround, the risk-reward profile currently favors the retail titans at this investment crossroads.
