Costco vs. TJX Companies: Which Discount Retail Stock Is a Buy?

Costco Wholesale Corporation COST and The TJX Companies, Inc. TJX hold prominent positions within the Retail–Discount Stores industry. Costco boasts a substantial market capitalization of approximately $421.8 billion, operating on a membership-based warehouse model focused on selling bulk goods at discounted prices. The company operates a global network of 914 warehouses, including 629 in the United States and Puerto Rico.In comparison, TJX Companies, with a market capitalization of around $155.6 billion, dominates the off-price retail segment through popular banners such as TJ Maxx, Marshalls, and HomeGoods. With more than 5,100 stores across nine countries, TJX specializes in offering branded apparel, home fashions and accessories at deep discounts, appealing to value-conscious consumers seeking treasure-hunt shopping experiences.Amid changing consumer habits and a volatile economic backdrop, the key question is which of these retail giants offers the better investment opportunity.The Case for CostcoCostco’s membership-based business model continues to be a pillar of its growth strategy. With consistently high renewal rates, the company enjoys strong customer loyalty that provides a recurring revenue stream. This helps Costco navigate economic uncertainties better than many peers. The steady expansion of executive memberships, which carry higher fees and generate stronger engagement, further strengthens this model, contributing meaningfully to overall profitability.The company has been steadily evolving beyond its brick-and-mortar roots by enhancing its digital capabilities and fulfillment network. Investments in e-commerce platforms, delivery services and flexible payment options like Buy Now Pay Later are enabling the company to create a seamless omnichannel experience. This integrated approach not only attracts digitally savvy shoppers but also deepens engagement with existing members by offering greater convenience and value.Costco’s ability to maintain competitive pricing while preserving healthy margins stems from its rigorous cost control and operational efficiency. The company’s bulk purchasing power and efficient supply chain allow it to mitigate inflationary pressures and pass savings to customers.The growing success of Kirkland Signature, Costco’s private-label brand, highlights the company’s ability to blend quality with affordability. By expanding sourcing closer to its key markets, Costco is reducing supply-chain costs while ensuring consistent product availability. The brand’s rising penetration not only supports margin expansion but also enhances Costco’s competitive edge, differentiating it further in the retail landscape.The Case for TJX CompaniesTJX Companies has shown consistent operational strength, underpinned by a resilient business model and the ability to navigate economic cycles. The company’s off-price retail strategy continues to resonate with consumers seeking both value and quality. By consistently delivering a treasure-hunt shopping experience, TJX has cultivated a loyal customer base, ensuring steady traffic growth across its banners. A key strength of TJX is its exceptional merchandising and sourcing capabilities, enabling it to offer customers high-quality products at attractive prices. This also allows TJX to update assortments frequently and keep stores relevant. The ability to source opportunistically across different regions and categories gives the company a structural advantage. The company's second-quarter fiscal 2026 highlights the broad-based strength of its portfolio. All key divisions, including Marmaxx, HomeGoods, TJX Canada and TJX International, achieved decent comparable store sales growth. TJX has demonstrated consistent efficiency in managing expenses, optimizing its supply chain and leveraging economies of scale as it expands its store base. These operational capabilities have protected margins in challenging times. This disciplined approach helps translate sales into meaningful earnings growth. In the last reported quarter, TJX delivered earnings of $1.10 per share, which marked a year-over-year increase of 15% on the strength of a 7% jump in consolidated net sales.TJX sees long-term potential to open more than 1,800 additional stores in existing markets and Spain, while also identifying growth opportunities through its joint venture in Mexico and investments in the Middle East. Its geographic diversity and broad customer appeal across income groups and demographics provide multiple avenues for expansion. Furthermore, the integration of digital channels complements its store growth strategy. TJX operates e-commerce sites for TJ Maxx, Marshalls and Sierra in the United States and TK Maxx in Europe.TJX anticipates earnings between $4.52 and $4.57 per share for fiscal 2026, implying a 6% to 7% year-over-year increase. The company expects consolidated comparable sales to grow around 3%, with a pretax profit margin in the range of 11.4-11.5%. Management guided net sales between $59.3 billion and $59.6 billion. While tariffs remain a concern, the current outlook underscores TJX’s ability to navigate broader economic challenges.COST vs. TJX: How Do Estimates Stack Up?The Zacks Consensus Estimate for Costco’s current fiscal-year sales and EPS implies year-over-year growth of 8.2% and 11.7%, respectively. The consensus estimate for EPS for the current fiscal year has risen by 3 cents to $18.00 over the past seven days.  Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for TJX Companies’ current fiscal-year sales and EPS suggests a year-over-year increase of 5.4% and 7.5%, respectively. The consensus estimate for EPS for the current fiscal year has increased by 8 cents to $4.58 over the past 30 days. Image Source: Zacks Investment ResearchCOST vs. TJX: A Look at Past-Year Stock PerformanceDespite operating in the same industry, the stock trajectories of Costco and TJX Companies have diverged significantly. Shares of Costco have advanced 5.5% over the past year, while TJX Companies shares have rallied 19%. Well, both COST & TJX have outpaced the industry’s modest rise of 3.1%. Image Source: Zacks Investment ResearchCOST vs. TJX: A Peek Into Stock ValuationCostco is trading at a forward 12-month price-to-earnings (P/E) ratio of 48.59, lower than its one-year median of 50.61. Meanwhile, TJX Companies’ forward P/E ratio stands at 28.76, above its median of 27.03. Image Source: Zacks Investment ResearchCOST vs. TJX: Which Stock Looks More Promising Now?Both Costco and TJX Companies bring unique strengths to the table. Costco, with its membership-driven model and operational discipline, and TJX, with its resilient off-price strategy and expansion potential. However, considering the broader growth runway, store expansion opportunities, strong customer engagement and the ability to navigate economic cycles effectively, TJX appears to hold the edge as the better bet for investors at this point. Costco carries a Zacks Rank #3 (Hold), while TJX Companies currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Free Report: 3 Software Stocks Poised to SkyrocketSoftware stocks are poised to catapult higher in the coming months (and years) thanks to several factors, especially the explosive growth of AI. Zacks' urgent report reveals 3 top software stocks to own right now.Access the report free today >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The TJX Companies, Inc. (TJX): Free Stock Analysis Report Costco Wholesale Corporation (COST): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks