U.S. inflation reaccelerated in September, and the renewed rise has left households paying more at the pump and at the grocery aisle. Every month, the same wallet buys less gasoline and fewer groceries, leaving consumers under pressure. Yet as the hot inflation print lands, the more useful question is which companies actually grow stronger while everyone else’s budget shrinks. Two of the biggest names in American retail, Walmart (WMT) and Costco (COST), have built their entire models around exactly this moment, and their latest numbers suggest the approach is working.
The Consumer Price Index rose 3.7% over the 12 months through September, up from 3.4% in August, according to the Bureau of Labor Statistics. Gasoline drove much of the increase, climbing 9.1% on the month and 34.2% over the year, while core inflation, which strips out food and energy, ran at a cooler 2.6%.
A key gap sits inside the report. Food away from home, meaning restaurant meals, rose 3.5% over the year, notably faster than the 1.8% increase in food bought to cook at home. When eating out grows pricier faster than cooking at home, people cook more and shop harder for the best price on what they put in the cart. That gap matters for stocks like Costco and Walmart.
Neither retailer markets itself as cheap, but both operate on such thin markups that there is barely any room left to cut. Costco caps markup at 14% on regular merchandise and 15% on its Kirkland Signature private label, a rule it has kept for decades so members never have to doubt they are getting the best price. Costco earns its money on membership fees rather than on products on the shelf, which removes any incentive to overcharge on a jar of peanut butter.
Walmart runs the same logic at larger scale: it prefers to sell more at a sliver of margin rather than fewer items at a fat one. When inflation hits, this structural cheapness becomes a magnet for savvy shoppers, feeding higher sales and better growth. The gap shows up directly in gross margin, where Costco sits at 12.82% against Walmart’s 25.23%.
Per Retail Dive, Walmart’s U.S. comparable sales grew 3.4% last quarter, excluding a one-time drag from health and wellness, while total revenue rose 5.9% to $187.9 billion and global e-commerce sales jumped 23%. The company said it was holding onto its lower-end base while adding higher-end shoppers, with higher-income customers showing up alongside its traditional clientele, exactly the pattern expected when everyone hunts for value.
Costco’s fiscal fourth quarter was sharper still. Sales rose 11.2% to $93.9 billion, comparable sales climbed 9.4%, and membership fee income grew 7.3% to $1.85 billion. Renewal rates reached 92.3% in the U.S. and Canada, while its pricier tier of cash-reward executive memberships grew 9.4% to an all-time high of 42.3 million. Consumers are not merely shopping at Costco; they are willing to pay extra to keep doing so.
Here the picture gets less clean. Both stocks already reflect much of this good news, and both have been on a tear, rising more than 10% over the past month. Walmart trades at a forward earnings multiple in the mid-30s, well above its own five-year median in the mid-20s, a sign that the market has priced in considerable optimism. Costco looks even richer in absolute terms, in the low-40s, though that level is close to where it has averaged over the past several years, making the premium more the price of admission to a strong business than a new story.
Neither stock is a screaming bargain today. A slowdown in comparable sales or a shift in sentiment could hit both harder than a typical retailer, given how much optimism is already baked in. If inflation keeps running hot into 2027, however, the preferable position is to own the two retailers whose entire model depends on being the cheapest option in town rather than to bet against them.
