"Costco sells its products with very little markup, choosing instead to make most of its money from membership sales. This business model makes sense: The better deals it has, the more likely people are to want a membership. Memberships at Costco are booming. In the fiscal first quarter of 2026, overall memberships were up 5% year over year to 146 million. And its higher-priced executive memberships were up a stronger 9%."
"For Walmart, this multi-year trend is the direct result of the company's growth in digital offerings, including e-commerce and advertising. Walmart's global e-commerce sales reached 23% of total sales in fiscal 2026, a record high. The company's e-commerce platforms have better economics than in-store sales. But the platforms also allow for high-margin third-party services."
"In fiscal 2026 (which ended in January), the company generated revenue of more than $700 billion, up nearly 5% year over year. But the bigger news was that its profits jumped even further. This double-digit jump in membership income greatly helps Costco's bottom line. Q1 net income was up 11%, which is impressive for a business of this size with relatively low growth."
Walmart and Costco, two retail giants, are experiencing significant profit growth outpacing their revenue increases. Walmart generated over $700 billion in fiscal 2026 revenue with accelerating profits, driven primarily by digital expansion including e-commerce and advertising services. E-commerce now represents 23% of Walmart's total sales at record levels. Costco, with over $280 billion in trailing twelve-month revenue, is experiencing membership growth of 5% overall and 9% for premium executive memberships, resulting in 14% membership income growth. This membership revenue model, combined with minimal product markups, generated 11% net income growth in Q1 2026. Both companies demonstrate how operational leverage and strategic business model adjustments drive profitability beyond traditional sales growth.
Read at The Motley Fool
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