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The recent news of Walmart's subscription program ignites the old Walmart (Ticker: WMT) vs. Costco (Ticker: COST) debate. Aside from the launch of Walmart+, the question is whether these retail giants benefit from the pandemic? And whether their performance during the COVID-19 pandemic justifies adding to our portfolio?
This is Sailesh Tirupasur. I'm a part of Stock Card's summer internship program in 2020, and this post is a part of my Stock Battle series. I used to publish them every day in our private user community, and I'm expanding them to the blog as of July 8th, 2020.
Stock research and analysis
Costco and Walmart are two of the biggest retail store chains in the United States. While the retail industry seems to be shrinking due to pandemic difficulties and the rise of online shopping, these two retail giants seem to still be going strong.
Costco has recovered from a 30% year-over-year drop in-store visits in April to only a 6.5% drop in June. Moreover, with Texas, Florida, and Arizona seeing a massive rise in cases of COVID-19, Costco is one of the first places consumers visit to stock up on anything from food to household appliances. Costco has seen significant success with its membership model, and almost 20% of all its members are part of their more expensive business membership. On top of that, the wholesaler last reported May sales numbers on June 3 that show a 5.5% U.S. sales jump from the same month last year. Walmart is planning to announce its own membership program later this month called Walmart+, and is expected to offer several perks designed to get customers to shop more often. This has investors excited as loyalty programs like Amazon Prime or Walmart+ tend to lock customers into longer-term relationships with the company. However, some experts are relatively cautious due to the amount of expenditure required in replicating Amazon's delivery system. Amazon has seen nearly a 30% increase every year in delivery costs, which seems to keep going up.
Final decision
While Walmart+ program seems quite promising for the massive retail store, I would have to go with Costco as a safer investment. Costco has a better performance against the overall market and already has a tried-and-teste membership model with many loyal customers. It's a safer bet.
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