Quick Read
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Walmart surged 3% and Costco climbed 2% as hotter-than-expected September inflation drove investors into defensive consumer staples stocks.
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SPY fell 1% and XRT dropped 0.5%, making Walmart and Costco's gains stand out sharply against a broad market selloff.
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Walmart's 41x P/E leaves little margin for error as rising inflation pushes up goods, labor, and benefits costs simultaneously.
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A hotter-than-expected September inflation report is pushing money toward the retailers that sell everyday necessities, and one discount giant is out in front. Walmart( NASDAQ:WMT ) stock is trading at $115.10, up 3% and leaving WMT shares up 4% year to date (YTD).
Similarly, Costco Wholesale( NASDAQ:COST ) stock is at $976.30, up 2%, riding the same defensive bid. Meanwhile, Target( NYSE:TGT ) stock is at $153.43, up 0.9%, a softer gain given its discretionary mix.
Those gains stand out on a down day for stocks. The SPDR S&P 500 ETF Trust( NYSEARCA:SPY ) is declining by 1.33%. Retail as a whole is also under pressure, with the SPDR S&P Retail ETF( NYSEARCA:XRT ) down 0.5%.
Hot Inflation Report Sends Money Into Staples
September inflation came in above forecasts, and consumer staples held up while the broad market traded lower on the hotter reading. Shoppers were already uneasy heading into the report, with the University of Michigan consumer sentiment index at 51.7 in August. Market swings stayed measured, as the Cboe Volatility Index (VIX) sat at 15.27 on October 13, inside its normal range.
Walmart also has company-specific news in the mix. On October 13, the retailer told its U.S. associates it's adding benefits for the coming plan year, including a zero-dollar prescription tier, a rare conditions center of excellence and dedicated paid leave for parents whose newborns need intensive care.
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Inflation Cuts Both Ways for Walmart
That inflation reading raises what Walmart pays for goods and labor, and the benefits expansion adds to that cost base, though Walmart enters this stretch with momentum. In Q2 FY2027, its adjusted earnings per share (EPS) of $0.81 beat expectations and revenue rose 5.9% to $187.94 billion. Management then lifted its full-year adjusted EPS guidance to $2.80 to $2.87.
The retailer's digital and subscription businesses add support, with global eCommerce up 23% and membership fee revenue up 17% in the quarter. CEO John Furner stated in that release that "customers are choosing Walmart because we deliver price, speed, and convenience across a broad assortment."
Priced at a P/E ratio of 41x, Walmart stock leaves less room for error if margins tighten. Even the company's own Q3 FY2027 outlook calls for adjusted EPS of $0.62 to $0.64 and operating income growth of 2% to 4% in constant currency, as management reinvests tariff refunds into pricing and customer experience.
Costco and Target Take Different Paths
Walmart and Costco sell groceries and household essentials that customers buy whatever the economy does, while Target carries a heavier mix of discretionary general merchandise. In Q4 FY2026, Costco's comparable sales rose 9.4%, membership fee income grew 7.3% to $1.85 billion and the worldwide renewal rate reached 89.8%.
Costco shares are up 14% YTD, well ahead of Walmart stock. A CNBC Halftime Report panelist flagged the catch in August, arguing that for Walmart stock and Costco stock, "in the near term you have this valuation obstacle in front of you."
Target stock has run furthest, up 61% YTD. Leadership at Target lifted its full-year adjusted EPS guidance to $9.90 to $10.90 alongside its Q2 FY2026 results, though that range includes $1.65 per share from tariff refunds. Separately, the retailer cut prices on more than 10,000 items to sharpen its value pitch.
Walmart's Price Gap Decides What Comes Next
The next test is whether Walmart can hold its low-price position as costs rise. The company's Q3 FY2027 report could show whether reinvesting tariff refunds into pricing protects that gap without squeezing margins too far.
Costco leans on membership fees, while Target's discretionary mix leaves it more exposed to cautious shoppers. Staples leadership on a down day can fade quickly if the next inflation reading cools.
Defensive appeal and a rising cost base can both hold true for Walmart. It's still wise, though, for cautious investors to keep their WMT stock position sizes modest.
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