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Costco vs. Dollar General: Which Retail Stock Is the Better Buy Now?
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Key Takeaways
Costco's fee income rose 7.3%, with paid memberships up 3.8% and Executive memberships up 9.4%.
Dollar General's same-store sales rose 3.5%, supported by 2% traffic growth and higher transactions.
Digital growth is strengthening both retailers through delivery expansion and rising customer engagement.
Costco Wholesale Corporation (COST - Free Report) and Dollar General Corporation (DG - Free Report) are two leading players in the U.S. discount retail sector, catering to value-conscious shoppers through distinct business models. Costco, with a market capitalization of about $408 billion, stands out as a membership-based warehouse retailer recognized for its low-price positioning, limited product assortment and strong customer loyalty. The company operates 939 warehouses globally, with a substantial presence in the United States, supported by a growing digital platform and expanding ancillary businesses.
Conversely, Dollar General, with a market capitalization of approximately $26 billion, operates an extensive network of small-format stores focused on convenience and affordability. The company has more than 21,000 stores, with locations situated within five miles of roughly 75% of the U.S. population, giving it a strong presence in rural and underserved communities. Its value proposition is supported by everyday low prices, a broad assortment of consumables and general merchandise, expanding delivery capabilities and ongoing store-remodel initiatives.
Both retailers are operating in a rapidly evolving consumer environment, marked by changing spending patterns, heightened value sensitivity and intensifying competition. For investors, the central question is which discount retail stock currently presents the greater upside opportunity.
The Case for COST
Costco’s membership ecosystem remains the foundation of its competitive advantage, supporting recurring revenue and strong customer loyalty. Membership fee income increased 7.3% year over year to $1.85 billion in the fourth quarter of fiscal 2026. The worldwide renewal rate improved to 89.8%, while the United States and Canada renewal rate reached 92.3%. Costco ended the quarter with 84.1 million paid members, up 3.8% from a year earlier.
The company is deepening engagement with its existing member base. Executive memberships reached 42.3 million, up 9.4% year over year, while Executive members accounted for 75.6% of sales. Costco is attracting younger customers through digital channels, with members under 40 now representing more than one-quarter of its total membership base. Management expects higher Executive penetration to support renewal rates over time, as Executive members generally renew at higher rates than Gold Star members.
Warehouse expansion provides another significant runway for growth. Costco opened 28 warehouses in fiscal 2026, including three relocations, resulting in 25 net new locations and bringing its global warehouse count to 939. Management plans another 33 openings in fiscal 2027, including five relocations, as it works toward roughly 30 net new warehouses annually. The company continues to see opportunities across new U.S. markets, mature-market infill locations and international markets. Costco plans to increase capital expenditures to about $7.5 billion in fiscal 2027 as it accelerates warehouse and supply-chain investment, raising near-term spending requirements.
Digital expansion is becoming an increasingly important growth contributor. Digitally enabled comparable sales increased 19.5% in the fourth quarter, while site and app traffic rose 30%. Costco has expanded same-day delivery through Instacart, DoorDash and Uber Eats, while personalization initiatives generated triple-digit sales growth during the quarter. Traffic originating from AI search also grew at a triple-digit rate for the second consecutive quarter and continued to post the highest conversion rate among site-traffic sources.
That said, some challenges linger. Costco continues to navigate rising costs related to healthcare, general liability, commodities, freight and tariffs. While the company has leveraged productivity initiatives and supply-chain efficiencies to mitigate some pressures, uncertainty around oil prices, tariffs and other input costs could weigh on margin performance.
The Case for DG
Dollar General’s value-focused business model and emphasis on everyday essentials provide a solid foundation for continued growth. The company’s assortment is built around affordability and convenience, helping it remain relevant to value-conscious customers. In the second quarter of fiscal 2026, Dollar General gained market share in both consumable and nonconsumable products, while same-store sales increased 3.5% on 2% traffic growth and a 1.5% increase in average transaction amount. All four merchandising categories delivered positive comparable sales for the sixth consecutive quarter.
The company is making meaningful progress across its store-improvement initiatives. Through the second quarter, Dollar General completed 1,324 Project Renovate remodels and 1,422 Project Elevate remodels, with full-year plans for approximately 2,000 and 2,250, respectively. Management is targeting annualized comparable-sales lifts of about 6% from Renovate stores and 3% from Elevate stores, highlighting the potential to improve productivity across the mature store base.
Digital expansion is creating another avenue for customer acquisition and incremental sales. Dollar General is growing myDG Delivery alongside DoorDash and Uber Eats, with management estimating that delivery sales are approximately 80% incremental and generate high repeat rates. The DG Media Network adds another monetization opportunity through sponsored products, improved search and advertising across digital and physical channels.
Merchandising and efficiency initiatives are improving the growth quality. Combined nonconsumable comparable sales increased 4.5% in the quarter and continued to outpace consumables, supporting a favorable mix shift because nonconsumables generally carry higher margins. Dollar General reported significant improvement in inventory shrink and further progress on damages, while initiatives around supply-chain productivity, category management, private brands and inventory optimization provide additional opportunities to strengthen margins.
Dollar General has a sizable runway for physical expansion. The company plans approximately 450 new stores in the United States and about 10 in Mexico in fiscal 2026, alongside continued investment in store formats designed to support broader assortments and greater productivity. Strong first-half performance also led management to raise its fiscal 2026 outlook to net sales growth of 4-4.3% and same-store sales growth of 2.5-2.9%, reflecting confidence in the underlying momentum of the business.
How Does the Zacks Consensus Estimate Compare for COST & DG?
The Zacks Consensus Estimate for Costco’s current fiscal-year sales and EPS implies growth of 8.3% and 11.8%, respectively, from the year-ago period’s actuals. For the next fiscal year, the consensus estimate indicates a 7.2% rise in sales and 9.1% growth in earnings. The consensus estimate for EPS for the current fiscal year has increased 36 cents to $22.87 over the past 30 days, while for the next fiscal year, it has improved by 45 cents to $24.94.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Dollar General’s current fiscal-year sales and EPS implies declines of 4.3% and 15.9%, respectively, from the year-ago period’s actuals. For the next fiscal year, the consensus estimate indicates a 4.2% rise in sales and 5.8% growth in earnings. The consensus estimate for EPS for the current fiscal year has increased 9 cents to $7.94 over the past 30 days, while for the next fiscal year, it has improved by 6 cents to $8.40.
Image Source: Zacks Investment Research
Stock Performance of COST & DG
Over the past year, shares of Costco have gained 1.1%, whereas Dollar General has jumped 21.2%. Meanwhile, the Zacks Retail - Discount Stores industry saw a growth of 9% in the same time frame.
Image Source: Zacks Investment Research
Dive Into Stock Valuations of COST & DG
Costco’s forward 12-month price-to-earnings (P/E) multiple sits at 39.93, below its median of 46.88 in the last three years. Dollar General is trading at a forward P/E multiple of 14.42, below its median of 16.24 in the last three years.
Image Source: Zacks Investment Research
COST or DG: Which Is the Better Bet Now?
Dollar General appears better positioned than Costco at this stage. Its improving traffic trends, store-remodel initiatives, expanding digital capabilities and ongoing efforts to improve merchandising and operating efficiency provide multiple avenues for growth. Costco still offers a highly resilient membership-based model, strong customer loyalty and solid digital momentum, but Dollar General’s lower valuation and improving business trends offer greater upside potential.
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Costco vs. Dollar General: Which Retail Stock Is the Better Buy Now?
Key Takeaways
Costco Wholesale Corporation (COST - Free Report) and Dollar General Corporation (DG - Free Report) are two leading players in the U.S. discount retail sector, catering to value-conscious shoppers through distinct business models. Costco, with a market capitalization of about $408 billion, stands out as a membership-based warehouse retailer recognized for its low-price positioning, limited product assortment and strong customer loyalty. The company operates 939 warehouses globally, with a substantial presence in the United States, supported by a growing digital platform and expanding ancillary businesses.
Conversely, Dollar General, with a market capitalization of approximately $26 billion, operates an extensive network of small-format stores focused on convenience and affordability. The company has more than 21,000 stores, with locations situated within five miles of roughly 75% of the U.S. population, giving it a strong presence in rural and underserved communities. Its value proposition is supported by everyday low prices, a broad assortment of consumables and general merchandise, expanding delivery capabilities and ongoing store-remodel initiatives.
Both retailers are operating in a rapidly evolving consumer environment, marked by changing spending patterns, heightened value sensitivity and intensifying competition. For investors, the central question is which discount retail stock currently presents the greater upside opportunity.
The Case for COST
Costco’s membership ecosystem remains the foundation of its competitive advantage, supporting recurring revenue and strong customer loyalty. Membership fee income increased 7.3% year over year to $1.85 billion in the fourth quarter of fiscal 2026. The worldwide renewal rate improved to 89.8%, while the United States and Canada renewal rate reached 92.3%. Costco ended the quarter with 84.1 million paid members, up 3.8% from a year earlier.
The company is deepening engagement with its existing member base. Executive memberships reached 42.3 million, up 9.4% year over year, while Executive members accounted for 75.6% of sales. Costco is attracting younger customers through digital channels, with members under 40 now representing more than one-quarter of its total membership base. Management expects higher Executive penetration to support renewal rates over time, as Executive members generally renew at higher rates than Gold Star members.
Warehouse expansion provides another significant runway for growth. Costco opened 28 warehouses in fiscal 2026, including three relocations, resulting in 25 net new locations and bringing its global warehouse count to 939. Management plans another 33 openings in fiscal 2027, including five relocations, as it works toward roughly 30 net new warehouses annually. The company continues to see opportunities across new U.S. markets, mature-market infill locations and international markets. Costco plans to increase capital expenditures to about $7.5 billion in fiscal 2027 as it accelerates warehouse and supply-chain investment, raising near-term spending requirements.
Digital expansion is becoming an increasingly important growth contributor. Digitally enabled comparable sales increased 19.5% in the fourth quarter, while site and app traffic rose 30%. Costco has expanded same-day delivery through Instacart, DoorDash and Uber Eats, while personalization initiatives generated triple-digit sales growth during the quarter. Traffic originating from AI search also grew at a triple-digit rate for the second consecutive quarter and continued to post the highest conversion rate among site-traffic sources.
That said, some challenges linger. Costco continues to navigate rising costs related to healthcare, general liability, commodities, freight and tariffs. While the company has leveraged productivity initiatives and supply-chain efficiencies to mitigate some pressures, uncertainty around oil prices, tariffs and other input costs could weigh on margin performance.
The Case for DG
Dollar General’s value-focused business model and emphasis on everyday essentials provide a solid foundation for continued growth. The company’s assortment is built around affordability and convenience, helping it remain relevant to value-conscious customers. In the second quarter of fiscal 2026, Dollar General gained market share in both consumable and nonconsumable products, while same-store sales increased 3.5% on 2% traffic growth and a 1.5% increase in average transaction amount. All four merchandising categories delivered positive comparable sales for the sixth consecutive quarter.
The company is making meaningful progress across its store-improvement initiatives. Through the second quarter, Dollar General completed 1,324 Project Renovate remodels and 1,422 Project Elevate remodels, with full-year plans for approximately 2,000 and 2,250, respectively. Management is targeting annualized comparable-sales lifts of about 6% from Renovate stores and 3% from Elevate stores, highlighting the potential to improve productivity across the mature store base.
Digital expansion is creating another avenue for customer acquisition and incremental sales. Dollar General is growing myDG Delivery alongside DoorDash and Uber Eats, with management estimating that delivery sales are approximately 80% incremental and generate high repeat rates. The DG Media Network adds another monetization opportunity through sponsored products, improved search and advertising across digital and physical channels.
Merchandising and efficiency initiatives are improving the growth quality. Combined nonconsumable comparable sales increased 4.5% in the quarter and continued to outpace consumables, supporting a favorable mix shift because nonconsumables generally carry higher margins. Dollar General reported significant improvement in inventory shrink and further progress on damages, while initiatives around supply-chain productivity, category management, private brands and inventory optimization provide additional opportunities to strengthen margins.
Dollar General has a sizable runway for physical expansion. The company plans approximately 450 new stores in the United States and about 10 in Mexico in fiscal 2026, alongside continued investment in store formats designed to support broader assortments and greater productivity. Strong first-half performance also led management to raise its fiscal 2026 outlook to net sales growth of 4-4.3% and same-store sales growth of 2.5-2.9%, reflecting confidence in the underlying momentum of the business.
How Does the Zacks Consensus Estimate Compare for COST & DG?
The Zacks Consensus Estimate for Costco’s current fiscal-year sales and EPS implies growth of 8.3% and 11.8%, respectively, from the year-ago period’s actuals. For the next fiscal year, the consensus estimate indicates a 7.2% rise in sales and 9.1% growth in earnings. The consensus estimate for EPS for the current fiscal year has increased 36 cents to $22.87 over the past 30 days, while for the next fiscal year, it has improved by 45 cents to $24.94.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Dollar General’s current fiscal-year sales and EPS implies declines of 4.3% and 15.9%, respectively, from the year-ago period’s actuals. For the next fiscal year, the consensus estimate indicates a 4.2% rise in sales and 5.8% growth in earnings. The consensus estimate for EPS for the current fiscal year has increased 9 cents to $7.94 over the past 30 days, while for the next fiscal year, it has improved by 6 cents to $8.40.
Image Source: Zacks Investment Research
Stock Performance of COST & DG
Over the past year, shares of Costco have gained 1.1%, whereas Dollar General has jumped 21.2%. Meanwhile, the Zacks Retail - Discount Stores industry saw a growth of 9% in the same time frame.
Image Source: Zacks Investment Research
Dive Into Stock Valuations of COST & DG
Costco’s forward 12-month price-to-earnings (P/E) multiple sits at 39.93, below its median of 46.88 in the last three years. Dollar General is trading at a forward P/E multiple of 14.42, below its median of 16.24 in the last three years.
Image Source: Zacks Investment Research
COST or DG: Which Is the Better Bet Now?
Dollar General appears better positioned than Costco at this stage. Its improving traffic trends, store-remodel initiatives, expanding digital capabilities and ongoing efforts to improve merchandising and operating efficiency provide multiple avenues for growth. Costco still offers a highly resilient membership-based model, strong customer loyalty and solid digital momentum, but Dollar General’s lower valuation and improving business trends offer greater upside potential.
Costco currently carries a Zacks Rank #3 (Hold), while Dollar General sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.