Key Points
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Warehouse clubs like Costco and BJ’s are thriving as shoppers seek value in a shaky economy.
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Costco offers global scale and steady performance, while BJ’s is gaining ground with digital growth and expansion.
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Investors must weigh BJ’s growth potential against Costco’s proven consistency, or decide to put both in their portfolio’s shopping cart.
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10 stocks we like better than Costco Wholesale ›
In today’s tightening economy, value (or, at least, the perception of value) reigns supreme among average shoppers. With inflation concerns becoming stronger and whispers of a recession lingering, warehouse clubs are not just thriving, they’re stacking profits higher than a pallet of paper towels.
Whether you’re a family stretching every dollar or an investor looking for upside in retail stocks, Costco (NASDAQ: COST) and BJ’s Wholesale Club (NYSE: BJ) are both compelling plays. But they’re not created equal. One is a proven juggernaut, while the other is a nimble challenger with momentum.
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The recession playbook: value and volume
Warehouse clubs thrive when consumers start counting pennies. Though it may seem counterintuitive to spend more money upfront, shoppers turn to warehouse clubs in tough times because bulk deals offer a sense of value and stability. When budgets get tight, consumers swap avocado toast for 10-pound bags of rice.
Shoppers make the Costco versus BJ’s decision based on different priorities. Some gravitate to Costco for its premium private-label goods (like Kirkland), broad international reach, and reputation for quality and consistency. Others prefer BJ’s for its lower membership fees, frequent promotions, and the convenience of accepting manufacturer coupons. But when it comes to choosing between them as investments, the decision is more nuanced.
Costco, the veteran performer still hitting its marks
Costco is the undisputed heavyweight in the warehouse space, with over 900 stores globally — 50% more than it’s closest competitor, Sam’s Club — and a reputation for low turnover, high renewal rates, and fanatically loyal members. It’s not just anecdotal love, either, as the numbers back it up.
In May, comparable store sales rose 4.3%. But the real highlight was online sales, which surged 11.6%. That may not sound earth-shattering in an era of two-day shipping, but Costco has traditionally lagged in e-commerce. Seeing double-digit digital growth is a sign that the company isn’t resting on its brick-and-mortar laurels.
Looking ahead, analysts expect 8% same-store sales growth for Q3, driven largely by stores outside the U.S. The company is also experiencing meaningful growth in the Asia market, with 37 stores in Japan, 20 in Korea, 14 in Taiwan, 7 in China, and more planned for the future. That international tailwind speaks to Costco’s global brand power and ongoing expansion opportunities, traits that give the stock its status as a good steady, long-term bet.
BJ’s, the ‘little guy’ that’s growing fast
Then there’s BJ’s, Costco’s smaller rival based mainly on the East Coast. It’s gaining ground. While it operates only about a quarter of the clubs Costco does, it’s growing faster in both store count and digital capabilities. Membership income is up 8%, a promising sign for a company whose long-term health depends on keeping members engaged and renewing year after year.
Perhaps more impressive is BJ’s digital progress. Online-influenced sales, like click-and-collect and in-app deals, jumped 35% in Q1. That’s not just a flashy stat. It’s an indicator that BJ’s understands where the modern shopper is headed. While physical traffic still matters, digital channels increasingly influence what, when, and how customers buy. For a company playing catch-up, that kind of digital acceleration could unlock a new tier of growth.
But let’s not overlook the importance of store expansion, too. While BJ’s is opening a similar number of locations a year to Costco, those additions represent a much larger percentage of its total store base, making every new club more impactful to the top line. A faster growth in sales at existing stores, combined with an aggressive store expansion plan creates a powerful growth cocktail, if the company can maintain it.
The investor’s dilemma: predictability or potential?
So, how should investors choose? Both Costco and BJ’s benefit from economic headwinds, but they play different roles in an investment portfolio.
If you want the blue-chip, time-tested choice, it’s Costco. You’re paying a premium valuation, but you’re getting a strong financial foundation, robust international growth, and one of the stickiest membership models in retail with a 93% renewal rate. . The stock is less likely to wow you with sudden upside, but it’s also less likely to surprise you with volatility.
BJ’s, on the other hand, is cheaper, and not just in the aisles. The stock trades at a discount to Costco by nearly every metric. Can it keep growing memberships while maintaining quality service? Will renewal rates rise as its club footprint expands? Can it hold margins while investing in digital? Those are real risks. But for investors willing to bet on BJs, the upside could be significant.
If you’re looking for a reliable anchor in turbulent markets, Costco is tough to beat. But if you believe BJ’s can continue narrowing the gap, it might be worth giving the underdog a shot. Either way, you won’t just be shopping, you’ll be stock-piling.
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Philippa Main has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
