Wesfarmers vs Woolworths: Which ASX Retail Stock Looks the Better Buy in 2026?

Wesfarmers and Woolworths are two of the biggest names on the ASX. Both are fully franked dividend payers, and both are household brands. But they are very different businesses, and their 2026 share price paths have been very different too. Here is how they stack up after their FY26 results.

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Quick snapshot

• Wesfarmers (WES): Operates Bunnings, Kmart, Officeworks, Priceline, chemicals and lithium businesses. FY26 profit was $2.87 billion, up 8.3%. Its dividend rose 7.8% to $2.22 per share, fully franked.

• Woolworths (WOW): Operates supermarkets, online grocery, BIG W and New Zealand food businesses. FY26 underlying profit was $1.59 billion, up 15.4%. Its dividend increased 15.5% to 97 cents per share, fully franked.

Figures from each company's FY26 results, released in late August 2026.

Wesfarmers: A Diversified Retail Powerhouse

Wesfarmers delivered revenue of about $47.3 billion in FY26, up 3.4%. Bunnings earnings before tax rose 5% to $2.46 billion, and Kmart Group grew 6% to $1.11 billion. The chemicals, energy and fertilisers division (WesCEF) jumped 18.5%, helped by its Mt Holland lithium operation swinging from a loss to a profit. Management has also made a final investment decision to double Mt Holland production.

The company said early FY27 trading shows Bunnings sales growth slightly ahead of the second half of FY26, while Kmart and Officeworks remain positive.

The strengths: Diversification, a Bunnings business with a very high return on capital, and a steady record of dividend growth.

The catch: Bunnings and Kmart generate the bulk of group earnings, so the story is less diversified than it looks. Valuation is also the main debate. Wesfarmers has traded at roughly 28 to 33 times earnings depending on the date and measure, against a five-year average range of around 22 to 32 times. The shares have pulled back well below their 52-week high, but they are not obviously cheap.

Woolworths: A Recovery Story With Momentum

After a rough FY25, Woolworths has bounced back. Group EBIT rose 12.7% to $3.1 billion, though the company notes growth would have been 8.7% after adjusting for last year's industrial action and supply chain costs. Australian Food sales rose 4.6% to $53.85 billion, with EBIT up 8.5%. BIG W returned to profit. The final dividend rose 15.6% to 52 cents, taking the full-year payout to 97 cents (a 74.1% payout ratio).

Momentum looks encouraging: the company reported Australian Food sales growth of 7.6% in the first eight weeks of FY27. The shares hit their highest level since 2021 after the result, and on one data source were up around 36% year to date at the end of September.

The strengths: A dominant supermarket position, improving customer metrics, and an earnings recovery already underway.

The catch: The rally has stretched the valuation. Statutory earnings per share of about 93 cents put WOW on a P/E above 40, while underlying earnings imply a lower multiple of roughly 30 (my own estimate from reported figures). Either way, much of the good news may already be in the price. Supermarkets also face cost pressure, intense competition from Coles and Aldi, and ongoing regulatory scrutiny.

Head to Head: Dividends and Valuation

At recent prices (roughly $80 for WES and $39 to $41 for WOW), the numbers look like this:

• Dividend yield: Wesfarmers is around 2.8% and Woolworths around 2.5%, both fully franked. Wesfarmers has the higher yield, though its payout ratio is also higher (87.6% vs 74.1%), which leaves less room for dividend growth to outpace earnings.

• Earnings growth: Woolworths grew faster in FY26, but off a weaker base, so its headline growth is flattered.

• Valuation: Neither stock is cheap. Both trade at a premium to the broader market.

Share prices move daily, so check live figures before acting on any of these.

Which One Suits Which Investor?

Wesfarmers may suit you if you want diversification across retail, healthcare and resources, a slightly higher yield, and exposure to a business with strong brands and disciplined capital allocation. You should be comfortable paying a premium multiple.

Woolworths may suit you if you want a defensive, essential-spending business with a recovery story and strong near-term momentum, and you accept that you are buying after a big run.

The Bottom Line

There is no clear winner, and anyone claiming one is oversimplifying. Wesfarmers offers quality and diversification at a full valuation. Woolworths offers recovery momentum, but after a sharp rerating. Both have delivered growing, fully franked dividends.

Before deciding, consider how each fits your portfolio, your tax position, and how much valuation risk you are willing to carry. Many investors hold both, or compare them with Coles, for exactly that reason.

(Source : company Reports)