The Australian supermarket sector is largely governed by two key players: Coles Group Ltd and Woolworths Group Ltd. Together, they account for a substantial 67% of supermarket grocery sales in Australia, according to data from the Australian Competition and Consumer Commission (ACCC). As both companies remain integral to many investment portfolios, investors are keen to determine which stock may offer better prospects in 2026.
2025 Performance Overview
In 2025, the performance of Coles and Woolworths shares diverged significantly. Coles shares increased by approximately 13.5%, while Woolworths shares experienced a decline of 3.6%. For context, the S&P/ASX 200 Index rose by 6.26%, and the S&P/ASX 200 Consumer Staples Index fell just over 1%. This strong performance from Coles was propelled by solid growth in supermarket sales and earnings for the fiscal year 2025.
In its full-year results presentation, Coles reported a 11.0% increase in Group EBITDA and a 7.5% rise in EBIT from continuing operations, excluding significant items. These figures were largely driven by robust growth in supermarket earnings. Conversely, Woolworths faced challenges, with earnings trailing behind analysts’ expectations. In August, the company saw its shares drop by 12% in a single day following disappointing earnings results. For FY2025, Woolworths reported a 12.6% decline in EBIT to $2.75 billion and a 17.1% fall in net profit after tax to $1.39 billion compared to the previous fiscal year.
Market Outlook for 2026
Looking ahead to 2026, both Coles and Woolworths may still attract investors seeking defensive options. Defensive stocks are often favored during periods of market volatility, as demand for essential groceries tends to remain steady even during economic downturns.
On New Year’s Eve, Samantha Menzies from The Motley Fool emphasized that Woolworths shares now present a potential value opportunity for investors following a lackluster 2025. Meanwhile, investment bank Macquarie maintains a positive outlook on Coles, issuing an outperform rating with a price target of $26.10. This projection indicates an upside of over 21% from its current opening share price of $21.44. Additionally, TradingView has set a 12-month price target for Coles at $23.83, suggesting an upside of approximately 11%.
As investors weigh their options, it is important to consider the broader market context. With economic conditions fluctuating, the performance of these supermarket giants will be closely monitored.
Before making investment decisions, potential investors should conduct thorough research and consider expert insights. Notably, Scott Phillips, a well-regarded investment expert, has identified five stocks that he believes are currently better buys than Coles.
In conclusion, while Coles has shown strong growth recently, Woolworths may also present an attractive opportunity for investors willing to take a closer look. The dynamics between these two dominant players will continue to shape the Australian supermarket landscape in 2026 and beyond.
