Sam's Club: The Same Idea, Losing Money on the GoodsThin moat

Costco Wholesale (COST) — moat facet

Forty-three years, identical format, identical margin rate, and Sam's Club's operating expenses exceeded its gross profit. The variable is sales per club.

The clearest evidence that Costco's model is hard rather than obvious is that Walmart has been running it for forty-three years and cannot make the merchandise pay.

Sam's Club U.S., FY2026 ($M)$10,556MGross profit$10,639MOperating expenses$2,525MMembership andother income$2,442MOperating incomeThe merchandise operation is $83M in the red; all the profit is dues.
A controlled experiment run for forty-three years: identical format, identical margin rate, identical country, one variable. Costco's equivalent merchandise line earned $5,060 million.

Walmart's fiscal 2026 disclosure for Sam's Club U.S.: net sales $93,015 million, gross profit $10,556 million, operating expenses $10,639 million, membership and other income $2,525 million, operating income $2,442 million1. Subtract the expenses from the gross profit and the retailing operation is $83 million in the red. More than one hundred percent of Sam's Club's operating income is dues.

Costco's equivalent lines for fiscal 2025: gross margin $30,026 million, SG&A $24,966 million, membership fees $5,323 million, operating income $10,383 million2. The merchandise business earns $5,060 million and the dues add $5,323 million. Both companies run the same gross margin rate — 11.3% at Sam's Club, 11.12% at Costco — and only one of them clears its costs.

The variable is density. Sam's Club operates 601 clubs and 81 million square feet; Costco operates 914 warehouses and 134.7 million square feet. Per club: about $155 million of net sales at Sam's, about $295 million at Costco3 — and per square foot, about $1,148 against about $2,004. Costco's boxes are slightly larger and do nearly twice the volume, which is what turns the same margin rate into a profit, because almost every warehouse cost is fixed against the building rather than variable with the sale.

That gap has persisted for decades against an owner with unlimited capital, superior logistics and more buying power than Costco will ever have. It is the single most persuasive piece of evidence in this entire company file that the moat is real, because it is a controlled experiment: identical format, identical country, identical margin rate, one variable.

The honest caution is that Sam's Club does not have to be profitable. It is one of three segments inside a parent with $713.2 billion of fiscal 2026 revenue4, and an $83 million merchandise loss is immaterial there; during fiscal 2026 Walmart began combining the Sam's Club supply chain with Walmart U.S. "to streamline operations and leverage our enterprise systems and infrastructure over time"5, which lowers Sam's cost base using assets Costco cannot access. A rival that does not need the goods to pay can price below the level at which Costco's model works, for as long as its owner allows.

Watch Sam's Club net sales per club against Costco's. If Sam's closes the gap, the density advantage was a head start rather than a moat.

Moat trajectory: Holding steady

Sales per club, gross margin rate and operating margin at Sam's have all been flat for three years while Costco's have not. The gap is holding.

The number that tests this moat
Reported
Sam's Club U.S. gross profit less operating expenses
-$83M: $10,556M against $10,639M

The merchandise operation of the only comparable warehouse club in America loses money, so more than 100% of its operating income is membership dues. If integration pushes expenses below gross profit and holds them there, the experiment ends.

Source: Walmart Form 10-K, fiscal year ended January 31, 2026 ↗
References
  1. ReportedWalmart's fiscal 2026 disclosure for Sam's Club U.S.: net sales $93,015 million, gross profit $10,556 million, operating expenses $10,639 million, membership and other income $2,525 million, operating income $2,442 million.
    Walmart Form 10-K, fiscal year ended January 31, 2026 - Sam's Club U.S. segment (net sales $93,015M from 601 clubs and 81 million square feet, gross profit $10,556M, operating expenses $10,639M, membership and other income $2,525M, operating income $2,442M) — FY2026 (ended January 31, 2026) · publ. March 13, 2026 · source ↗
  2. ReportedCostco's equivalent lines for fiscal 2025: gross margin $30,026 million, SG&A $24,966 million, membership fees $5,323 million, operating income $10,383 million.
    Costco Form 10-K, fiscal year ended August 31, 2025 - Item 7 MD&A (net sales $269,912M, membership fees $5,323M, gross margin 11.12%, SG&A 9.25%, comparable-sales composition, capital expenditure, dividends and repurchases) — FY2025 · publ. October 8, 2025 · source ↗
  3. Moat Explorer calcPer club: about $155 million of net sales at Sam's, about $295 million at Costco — and per square foot, about $1,148 against about $2,004.
    Moat Explorer calculation: Costco FY2025 net sales of $269,912M over 134.7 million square feet and 914 warehouses; Sam's Club U.S. FY2026 net sales of $93,015M over 81 million square feet and 601 clubs — FY2025 vs Sam's Club FY2026 · publ. September 2026 · source ↗
  4. ReportedIt is one of three segments inside a parent with $713.2 billion of fiscal 2026 revenue, and an $83 million merchandise loss is immaterial there; during fiscal 2026 Walmart began combining the Sam's Club supply chain with Walmart U.S.
    Walmart Form 10-K, fiscal year ended January 31, 2026 - Sam's Club U.S. segment (net sales $93,015M from 601 clubs and 81 million square feet, gross profit $10,556M, operating expenses $10,639M, membership and other income $2,525M, operating income $2,442M) — FY2026 (ended January 31, 2026) · publ. March 13, 2026 · source ↗
  5. Reported"to streamline operations and leverage our enterprise systems and infrastructure over time", which lowers Sam's cost base using assets Costco cannot access.
    Walmart Form 10-K, fiscal year ended January 31, 2026 - Sam's Club U.S. segment (net sales $93,015M from 601 clubs and 81 million square feet, gross profit $10,556M, operating expenses $10,639M, membership and other income $2,525M, operating income $2,442M) — FY2026 (ended January 31, 2026) · publ. March 13, 2026 · source ↗
Sources
Generated September 23, 2026