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Costco vs. Target: Which Discount Retailer Should You Bet On?
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Key Takeaways
Target emerges as the better investment pick, backed by improving sales, digital growth and a lower valuation.
COST's membership growth, warehouse expansion and digital initiatives support its long-term growth prospects.
Target shares surged 51.4% YTD versus Costco's 15.1%, while its forward P/E of 15.27 trails Costco's 43.04.
Costco Wholesale Corporation (COST - Free Report) and Target Corporation (TGT - Free Report) are two major players in the Retail–Discount Stores industry, each leveraging distinct business strategies to attract value-conscious shoppers. Costco, with a market capitalization of about $439.6 billion, operates a membership-based warehouse model focused on offering a broad assortment of merchandise at competitive prices. The company operates 939 warehouses globally, including 647 in the United States and Puerto Rico.
Target, with a market capitalization of approximately $67.2 billion, follows a general-merchandise retail model built around affordable pricing, differentiated owned brands and a seamless omnichannel shopping experience. With 2,019 stores across the United States at the end of its latest reported quarter, the company leverages its extensive store network to support both in-store shopping and digital fulfillment.
As bargain hunters continue to prioritize value and convenience, both discount retailers are looking to capture a larger share of consumer spending. While Costco's membership-driven model supports customer loyalty and recurring revenues, Target's diversified merchandise assortment and omnichannel capabilities help attract shoppers and drive sales growth. The key question for investors is which retailer offers a more compelling investment opportunity at current levels.
The Case for Costco
Costco stands out as a compelling long-term investment opportunity, supported by its resilient business model, strong customer loyalty and sustained market share gains. The warehouse retailer's focus on offering quality merchandise at competitive prices helps attract shoppers and encourage higher spending, even in an uncertain consumer environment. Its ability to cater to both value-conscious households and shoppers seeking premium products further strengthens its competitive positioning. The ongoing expansion of its Kirkland Signature private-label portfolio, which offers meaningful savings over national brands without compromising quality, reinforces Costco's value proposition and competitive edge.
The company’s membership-driven business model provides a dependable recurring revenue stream and supports sustained customer engagement. Costco ended fiscal 2026 with 84.1 million paid memberships, representing 3.8% growth, while total cardholders increased 3.6% to 150.4 million. Fourth-quarter membership fee income advanced 7.3% to approximately $1,850 million. Worldwide renewal rates improved 10 basis points sequentially to 89.8%, while U.S. and Canadian renewal rates reached 92.3%. Growing adoption of Costco’s premium Executive membership tier also provides a meaningful opportunity to strengthen customer engagement and increase spending per member. Costco ended fiscal 2026 with 42.3 million paid Executive members, up 9.4% year over year.
Costco’s expanding digital capabilities provide another compelling growth avenue as consumers increasingly prioritize convenience, faster fulfillment and seamless shopping experiences. The retailer is strengthening its omnichannel ecosystem through website and mobile application improvements, personalized product recommendations and expanded delivery partnerships with Instacart, DoorDash and Uber Eats. These initiatives are helping attract younger shoppers and capture additional purchasing occasions beyond traditional warehouse visits. Digitally enabled sales exceeded $33 billion in fiscal 2026, growing more than 20%. Management indicated that third-party delivery sales are largely incremental, complementing rather than replacing warehouse purchases. Costco is also exploring opportunities in artificial intelligence-driven product discovery while improving online product visibility and customer engagement.
Costco’s expanding warehouse network and diversified ancillary businesses further strengthen its long-term growth prospects. The company ended fiscal 2026 with 939 warehouses worldwide and plans to open 33 locations in fiscal 2027, including five relocations. Its longer-term ambition of reaching approximately 30 net new warehouses annually highlights substantial opportunities across underserved U.S. markets and international regions. Alongside physical expansion, Costco continues to broaden its appeal through gasoline, pharmacy and travel services, which provide compelling reasons for members to engage more frequently with the brand. Management plans roughly $7.5 billion in fiscal 2027 capital expenditures, primarily supporting warehouse expansion and supply-chain improvements.
The Case for Target
Target is gaining momentum as investments in merchandise differentiation, competitive pricing and enhanced shopping experiences resonate with consumers. Its renewed focus on serving families through a distinctive combination of style, quality and value is helping drive traffic and sales across categories and channels. In second-quarter fiscal 2026, comparable sales increased 3.8%, primarily driven by higher customer traffic, underscoring the effectiveness of its growth strategy. Broad-based demand across customer demographics and merchandise categories reinforces confidence. Encouraged by its first-half performance, management raised its fiscal 2026 net sales growth outlook to about 5%.
A key strength lies in Target's sharpened merchandising strategy, which prioritizes categories with significant growth potential, including Beauty, Health and Wellness, Food and Beverage, Baby and Kids, Apparel, Home and culturally relevant merchandise. The retailer is refreshing assortments, introducing emerging brands and improving product presentation to strengthen its appeal among shoppers. Its extensive Food transformation, featuring expanded fresh offerings and trend-focused products, is encouraging more frequent visits. The reinvention of its Fun101 business, with greater emphasis on toys, collectibles, LEGO and affordable electronics, is also generating encouraging demand. The planned introduction of Target Beauty Studio represents another opportunity to strengthen customer engagement.
Target's expanding digital capabilities and investments in technology further strengthen its growth prospects. The retailer is leveraging its extensive store network to offer convenient fulfillment options, including same-day delivery, Drive Up and Order Pickup, supporting a seamless shopping experience across channels. Comparable digital sales increased 8.7% in the second quarter, led by robust same-day delivery growth. TGT is also strengthening inventory reliability, supply-chain coordination and store execution to improve product availability. The retailer is deploying advanced tools such as Proxima to enhance inventory-flow planning and operational decision-making. Meanwhile, investments in new stores and remodeling existing locations are expanding customer reach and improving shopping experiences.
Target is also accelerating artificial intelligence initiatives to personalize shopping experiences, improve product discovery and enhance merchandising decisions. The company’s collaborations with OpenAI, Google Gemini and other technology platforms position the company to participate in the emerging agentic commerce landscape. Meanwhile, its Roundel advertising business, Target+ marketplace and Target Circle 360 membership program are generating strong growth and expanding higher-margin revenue opportunities. These complementary businesses strengthen customer loyalty, diversify revenue streams and offer opportunities to improve profitability as Target's digital ecosystem expands.
COST vs. TGT: How Do Estimates Stack Up?
The Zacks Consensus Estimate for Costco’s current fiscal-year sales and earnings per share suggests year-over-year growth of 8.4% and 11%, respectively. For the next fiscal year, the consensus estimates point to sales growth of 7.2% and earnings growth of 9.8%. Over the past 30 days, the Zacks Consensus Estimate for current-fiscal earnings has fallen 11 cents to $22.70, while the estimate for the next fiscal year has increased by 4 cents to $24.93.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Target’s current fiscal-year sales and earnings per share indicates year-over-year growth of 5.1% and 37.8%, respectively. For the next fiscal year, the consensus estimates point to a 3.1% increase in sales but a 9.5% decline in earnings. Over the past 30 days, the Zacks Consensus Estimate for earnings for the current and next fiscal year has been stable at $10.43 and $9.44, respectively.
Image Source: Zacks Investment Research
COST vs. TGT: A Look at Past-Year Stock Performance
Despite operating in the same industry, Costco and Target have delivered markedly different stock market performances. Costco shares have gained 15.1% year to date, while Target has significantly outperformed, rallying 51.4% over the same period.
Image Source: Zacks Investment Research
COST vs. TGT: A Peek Into Stock Valuation
Costco currently trades at a forward price-to-earnings (P/E) ratio of 43.04, below its one-year median of 44.35 but still at a notable premium to the industry average of 28.81. In contrast, Target’s forward P/E multiple of 15.27 is above its one-year median of 15.03 but remains well below the industry average, indicating a considerably lower valuation than Costco.
Image Source: Zacks Investment Research
COST vs. TGT: Which Stock Holds More Promise?
While both Costco and Target offer compelling growth opportunities in the discount retail space, Target appears to be the better investment choice at current levels. Costco’s resilient membership-driven business, strong customer loyalty and expansion initiatives support its long-term prospects. However, its premium valuation and recent downward earnings estimate revision warrant caution. Target, meanwhile, benefits from improving sales momentum, merchandising innovations, expanding digital capabilities and encouraging earnings growth prospects. Its relatively attractive valuation, coupled with impressive stock performance, makes TGT a more appealing pick for investors seeking value and growth potential. Both Costco and Target carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
Image: Bigstock
Costco vs. Target: Which Discount Retailer Should You Bet On?
Key Takeaways
Costco Wholesale Corporation (COST - Free Report) and Target Corporation (TGT - Free Report) are two major players in the Retail–Discount Stores industry, each leveraging distinct business strategies to attract value-conscious shoppers. Costco, with a market capitalization of about $439.6 billion, operates a membership-based warehouse model focused on offering a broad assortment of merchandise at competitive prices. The company operates 939 warehouses globally, including 647 in the United States and Puerto Rico.
Target, with a market capitalization of approximately $67.2 billion, follows a general-merchandise retail model built around affordable pricing, differentiated owned brands and a seamless omnichannel shopping experience. With 2,019 stores across the United States at the end of its latest reported quarter, the company leverages its extensive store network to support both in-store shopping and digital fulfillment.
As bargain hunters continue to prioritize value and convenience, both discount retailers are looking to capture a larger share of consumer spending. While Costco's membership-driven model supports customer loyalty and recurring revenues, Target's diversified merchandise assortment and omnichannel capabilities help attract shoppers and drive sales growth. The key question for investors is which retailer offers a more compelling investment opportunity at current levels.
The Case for Costco
Costco stands out as a compelling long-term investment opportunity, supported by its resilient business model, strong customer loyalty and sustained market share gains. The warehouse retailer's focus on offering quality merchandise at competitive prices helps attract shoppers and encourage higher spending, even in an uncertain consumer environment. Its ability to cater to both value-conscious households and shoppers seeking premium products further strengthens its competitive positioning. The ongoing expansion of its Kirkland Signature private-label portfolio, which offers meaningful savings over national brands without compromising quality, reinforces Costco's value proposition and competitive edge.
The company’s membership-driven business model provides a dependable recurring revenue stream and supports sustained customer engagement. Costco ended fiscal 2026 with 84.1 million paid memberships, representing 3.8% growth, while total cardholders increased 3.6% to 150.4 million. Fourth-quarter membership fee income advanced 7.3% to approximately $1,850 million. Worldwide renewal rates improved 10 basis points sequentially to 89.8%, while U.S. and Canadian renewal rates reached 92.3%. Growing adoption of Costco’s premium Executive membership tier also provides a meaningful opportunity to strengthen customer engagement and increase spending per member. Costco ended fiscal 2026 with 42.3 million paid Executive members, up 9.4% year over year.
Costco’s expanding digital capabilities provide another compelling growth avenue as consumers increasingly prioritize convenience, faster fulfillment and seamless shopping experiences. The retailer is strengthening its omnichannel ecosystem through website and mobile application improvements, personalized product recommendations and expanded delivery partnerships with Instacart, DoorDash and Uber Eats. These initiatives are helping attract younger shoppers and capture additional purchasing occasions beyond traditional warehouse visits. Digitally enabled sales exceeded $33 billion in fiscal 2026, growing more than 20%. Management indicated that third-party delivery sales are largely incremental, complementing rather than replacing warehouse purchases. Costco is also exploring opportunities in artificial intelligence-driven product discovery while improving online product visibility and customer engagement.
Costco’s expanding warehouse network and diversified ancillary businesses further strengthen its long-term growth prospects. The company ended fiscal 2026 with 939 warehouses worldwide and plans to open 33 locations in fiscal 2027, including five relocations. Its longer-term ambition of reaching approximately 30 net new warehouses annually highlights substantial opportunities across underserved U.S. markets and international regions. Alongside physical expansion, Costco continues to broaden its appeal through gasoline, pharmacy and travel services, which provide compelling reasons for members to engage more frequently with the brand. Management plans roughly $7.5 billion in fiscal 2027 capital expenditures, primarily supporting warehouse expansion and supply-chain improvements.
The Case for Target
Target is gaining momentum as investments in merchandise differentiation, competitive pricing and enhanced shopping experiences resonate with consumers. Its renewed focus on serving families through a distinctive combination of style, quality and value is helping drive traffic and sales across categories and channels. In second-quarter fiscal 2026, comparable sales increased 3.8%, primarily driven by higher customer traffic, underscoring the effectiveness of its growth strategy. Broad-based demand across customer demographics and merchandise categories reinforces confidence. Encouraged by its first-half performance, management raised its fiscal 2026 net sales growth outlook to about 5%.
A key strength lies in Target's sharpened merchandising strategy, which prioritizes categories with significant growth potential, including Beauty, Health and Wellness, Food and Beverage, Baby and Kids, Apparel, Home and culturally relevant merchandise. The retailer is refreshing assortments, introducing emerging brands and improving product presentation to strengthen its appeal among shoppers. Its extensive Food transformation, featuring expanded fresh offerings and trend-focused products, is encouraging more frequent visits. The reinvention of its Fun101 business, with greater emphasis on toys, collectibles, LEGO and affordable electronics, is also generating encouraging demand. The planned introduction of Target Beauty Studio represents another opportunity to strengthen customer engagement.
Target's expanding digital capabilities and investments in technology further strengthen its growth prospects. The retailer is leveraging its extensive store network to offer convenient fulfillment options, including same-day delivery, Drive Up and Order Pickup, supporting a seamless shopping experience across channels. Comparable digital sales increased 8.7% in the second quarter, led by robust same-day delivery growth. TGT is also strengthening inventory reliability, supply-chain coordination and store execution to improve product availability. The retailer is deploying advanced tools such as Proxima to enhance inventory-flow planning and operational decision-making. Meanwhile, investments in new stores and remodeling existing locations are expanding customer reach and improving shopping experiences.
Target is also accelerating artificial intelligence initiatives to personalize shopping experiences, improve product discovery and enhance merchandising decisions. The company’s collaborations with OpenAI, Google Gemini and other technology platforms position the company to participate in the emerging agentic commerce landscape. Meanwhile, its Roundel advertising business, Target+ marketplace and Target Circle 360 membership program are generating strong growth and expanding higher-margin revenue opportunities. These complementary businesses strengthen customer loyalty, diversify revenue streams and offer opportunities to improve profitability as Target's digital ecosystem expands.
COST vs. TGT: How Do Estimates Stack Up?
The Zacks Consensus Estimate for Costco’s current fiscal-year sales and earnings per share suggests year-over-year growth of 8.4% and 11%, respectively. For the next fiscal year, the consensus estimates point to sales growth of 7.2% and earnings growth of 9.8%. Over the past 30 days, the Zacks Consensus Estimate for current-fiscal earnings has fallen 11 cents to $22.70, while the estimate for the next fiscal year has increased by 4 cents to $24.93.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Target’s current fiscal-year sales and earnings per share indicates year-over-year growth of 5.1% and 37.8%, respectively. For the next fiscal year, the consensus estimates point to a 3.1% increase in sales but a 9.5% decline in earnings. Over the past 30 days, the Zacks Consensus Estimate for earnings for the current and next fiscal year has been stable at $10.43 and $9.44, respectively.
Image Source: Zacks Investment Research
COST vs. TGT: A Look at Past-Year Stock Performance
Despite operating in the same industry, Costco and Target have delivered markedly different stock market performances. Costco shares have gained 15.1% year to date, while Target has significantly outperformed, rallying 51.4% over the same period.
Image Source: Zacks Investment Research
COST vs. TGT: A Peek Into Stock Valuation
Costco currently trades at a forward price-to-earnings (P/E) ratio of 43.04, below its one-year median of 44.35 but still at a notable premium to the industry average of 28.81. In contrast, Target’s forward P/E multiple of 15.27 is above its one-year median of 15.03 but remains well below the industry average, indicating a considerably lower valuation than Costco.
Image Source: Zacks Investment Research
COST vs. TGT: Which Stock Holds More Promise?
While both Costco and Target offer compelling growth opportunities in the discount retail space, Target appears to be the better investment choice at current levels. Costco’s resilient membership-driven business, strong customer loyalty and expansion initiatives support its long-term prospects. However, its premium valuation and recent downward earnings estimate revision warrant caution. Target, meanwhile, benefits from improving sales momentum, merchandising innovations, expanding digital capabilities and encouraging earnings growth prospects. Its relatively attractive valuation, coupled with impressive stock performance, makes TGT a more appealing pick for investors seeking value and growth potential. Both Costco and Target carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.