DLTR - Costco vs. Dollar Tree: One Is Lowering Prices the Other Is Raising Them. Which Strategy Could Pay Off for Investors?
2024-04-04 07:45:00 ET
When it comes to the retail sector, the best companies often connect deeply with their frequent customers. Those stores that understand that and foster their customer relationships tend to have enduring businesses. Retailers that forget what made them great, meanwhile, sometimes end up destroying their businesses. For an example of that dichotomy playing out today, consider the differing strategies of Costco Wholesale (NASDAQ: COST) and Dollar Tree (NASDAQ: DLTR) .
Costco is a warehouse club chain, which means that its customers pay annual membership fees for the privilege of shopping in its stores. To be fair, that changes the equation a little bit on the retail side of things. In its fiscal 2023 (which ended Sept. 3), Costco generated $237.7 billion in revenue from its stores and nearly $4.6 billion from membership fees. But the cost associated with the selling of products and services at its stores was around $234 billion, meaning that the stores actually generated a gross profit of only around $3.5 billion, excluding the earnings from membership fees.
Image source: Getty Images.
For further details see:
Costco vs. Dollar Tree: One Is Lowering Prices, the Other Is Raising Them. Which Strategy Could Pay Off for Investors?