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The company reigns supreme in the membership-based warehouse retail segment. It's significantly bigger than rivals like Walmart -owned Sam's Club and BJ's Wholesaleand generates about double the sales per square foot that these two competitors do. Costco has also been a consistent winner for shareholders over the last decade, as you can see from the chart below.

However, despite its impressive track record and set of competitive advantages, there may be better investments in the retail sector today. As essential businessesboth Costco and Target have been among the rare retail winners this year, but Target looks better positioned to build on Ad momentum going forward, and the stock is significantly cheaper today. Let's take a look at a few reasons why Target looks like the better bet.

E-commerce has taken center stage during the coronavirus pandemic, and every retailer has realized that it's essential to be able to meet customers online. According to eMarketer, Costco and Target generate the same amount of e-commerce sales with an estimated 1. Costco's share slipped from 1. It also acquired Innovel Solutions CCostco March to help it with big, bulky deliveries like appliances.

A better e-commerce strategy

Costco's e-commerce sales have nearly doubled during the pandemic as shoppers look to avoid stores, but those sales could move back to the retailer's stores once the pandemic is over. Target, on the other hand, is meeting online shoppers on multiple fronts with same-day delivery with Shipt, free two-day delivery, and pickup options like Drive Up and in-store pickup. Both companies continue to open new stores, but Target is focused Costco And Sam s Club opening small-format stores in underserved urban neighborhoods and college towns that complement its e-commerce strategy. Costco, on the other hand, has shown little interest in leveraging e-commerce in its new-store opening strategy. The impressive gains in Costco stock over the past decade haven't come solely from earnings growth.

Both retailers have had a stellar year, but here's why Target's the better choice.

As the chart below shows, multiple expansion has played a big role. Costco's price-to-earnings ratio has essentially doubled in the past decade even as the company has become much bigger. Target, by comparison, trades at a price-to-earnings ratio of 23, suggesting that Target's profits are nearly half as cheap as Costco's are.]