Supermarket shares are defensive because food demand is resilient, but the sector is not risk-free. Margins are thin, cost-of-living pressure is intense, tobacco is a structural headwind, and the ACCC supermarket inquiry remains an important backdrop after making 20 recommendations around competition, pricing and supplier outcomes.
Despite this, it is never too bad of an idea to invest in what you know, and the vast majority of us will be shopping for food in brands that sit under one of these leading ASX listed names.
Best Supermarket Shares Compared
| Company | Woolworths Group | Coles Group | Metcash |
|---|---|---|---|
| Latest price | A$34.62 | A$21.36 | A$3.09 |
| One-year share price move | +8.8% | -1.5% | -8.3% |
| Market cap | A$42.3b | A$28.5b | A$3.4b |
| P/E | 70.7 | 27.9 | 11.9 |
| Forward P/E | 23.4 | 22.1 | 11.7 |
| Dividend yield | 2.6% | 3.4% | 5.8% |
| Revenue TTM | A$70.3b | A$45.1b | A$17.3b |
| EBITDA | A$3.30b | A$2.55b | A$527.8m |
| Profit margin | 0.9% | 2.3% | 1.6% |
| ROE | 11.9% | 26.5% | 17.5% |
| Quarterly revenue growth YoY | 3.4% | 2.5% | 0.1% |
| Quarterly earnings growth YoY | -49.3% | -11.4% | 0.0% |
| Beta | 0.30 | 0.29 | 0.38 |
| Average price target | A$34.80 | A$23.24 | A$3.63 |
| Best fit | Scale and defensive quality | Best overall supermarket pick | Value and income |
Coles (COL): Best Overall
Coles looks like the best all-round supermarket share from the group on balance.
Whilst Coles does not have Woolworths’ scale, and it does not offer Metcash’s cheap valuation or 5.8% yield, it has the best balance of operating quality, supermarket momentum, dividend income, ROE and valuation.
The latest operating update supports that view. Coles reported 3Q26 supermarket sales revenue of A$9.8 billion, up 4.0%, with comparable supermarket sales up 3.6%. Excluding tobacco, supermarket sales revenue increased 5.7%, which is important because tobacco remains a structural drag across the sector. Coles also reported 24.8% eCommerce sales growth and online penetration rising to 13.6%.
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Coles shares have spent much of 2026 so far trading in a range between A$21-A$23, with the YTD performance almost flat, up 0.1%. With relative underperformance in the stock against Woolworths over the last year, there could be a catch-up trade with the right tailwinds.
Over the past five years, the earlier gap in performance moves in the other direction, with Coles shares having added 28.6%, whilst Woolworths shares have fallen back 2.48%. Momentum is with WOW, yet valuation allows us to look through that.
The valuation makes sense at these levels. Coles trades on a forward P/E of 22.1, has a dividend yield of 3.4%, and produces ROE of 26.5%. That makes it look a little more balanced than Woolworths and less cyclical than Metcash.
The main weakness is that Coles’ liquor division remains soft, with 3Q26 liquor sales down 3.9%. It also faces the same political and regulatory pressure as Woolworths. But from an investor’s perspective, Coles looks like the cleaner buy today because the core supermarket business is performing well and the valuation is not as stretched as Woolworths.
Woolworths (WOW): Best Scale
Woolworths remains the highest-quality and largest supermarket business in this group, but it does not necessarily look like the best stock at today’s price and valuation.
The business has enormous scale, a strong loyalty ecosystem, powerful digital assets, leading grocery market share, and broad exposure across Australian Food, New Zealand Food, B2B, BIG W and Petstock. That makes Woolworths the most defensive franchise of those on our list.
The latest operating update was stronger than it had been. Woolworths reported Q3 group sales of A$18.1 billion, up 4.5%, with Australian Food sales up 5.9% and group eCommerce sales up 20.2%. Management also said Australian Food sales in March and April to date were up 5.4%, though the company warned that fuel costs and price investments would affect Q4.
That is a good sign. Woolworths’ sales momentum is improving, and its digital grocery machine remains strong.
The momentum can be seen in the charts, with Woolworths share price up 17.64% since the start of 2026, undoing some of the earlier damage that continues to leave WOW 2.5% lower over the past five years.
The question now remains around valuation. Woolworths trades on a forward P/E of 23.4, has a dividend yield of 2.6%, and the latest share price is almost in line with the average price target. The trailing P/E looks very high because earnings have been depressed, but even on forward numbers, Woolworths does not look obviously cheap versus Coles.
For long-term defensive investors, Woolworths is still a high-quality hold. But as a fresh buy, the valuation is less attractive than Coles, and the yield is much lower than Metcash.
Metcash (MTS): Best Value and Income Selection
Metcash shares remain the most interesting option for value and income investors.
It is not a supermarket operator in the same way as Woolworths or Coles, but a wholesale distribution and marketing business supporting independent retailers across food, liquor and hardware, including IGA, Foodland, Mitre 10, Home Hardware, Total Tools, Cellarbrations and The Bottle-O.
That makes the investment case different. With Metcash, you are not getting a dominant national supermarket chain, but the wholesaler behind independent retailers, with extra exposure to liquor and hardware.
The valuation is the standout reason for inclusion here, with Metcash trading on a P/E of 11.9, a forward P/E of about 11.7, and a dividend yield of 5.8%. That is much cheaper than Coles and Woolworths, with a healthier dividend income to boot.
The latest update showed resilience rather than exciting growth, with Metcash reporting group revenue up 0.1% to A$8.5 billion for 1H26, or up 0.4% excluding tobacco, with EBITDA up 2.0% to A$367.2 million. Operating cash flow rose 59.9% to A$262.3 million, and the board declared an 8.5 cents per share fully franked interim dividend.
The issue here is growth. Metcash is cheaper for a reason. It has slower revenue momentum, hardware exposure adds some cyclicality, and the independent supermarket model does not have the same scale advantages as Coles or Woolworths.
Still, after an 8.3% one-year share price fall, Metcash shares have moved more than 15% up off May lows, and offers the clearest income and value angle in the sector. With selling pressure having eased in recent weeks, MTS bulls will be looking for a more sustained push through the remainder of the year.
In Short
Supermarket shares can still play a useful defensive role in a portfolio because grocery demand is resilient, cash flows are relatively steady, and dividends can be attractive. But this is no longer a simple “buy the biggest supermarket” story. Regulatory pressure, cost-of-living politics, supplier scrutiny and thin margins all matter.
Whilst households may cut back on restaurants, travel, fashion or big-ticket purchases when budgets are tight, they still need food, household staples and everyday essentials. That gives supermarket operators and food distributors a defensive revenue base that can hold up through weaker economic conditions.
The case for supermarket stocks is not about explosive growth, but more about reliable demand, strong store networks, loyalty programs, and steady cash generation. The risks are real, with thin margins, wage pressure, supplier scrutiny, regulatory attention and cost-of-living politics. But for investors looking for defensive earnings and dividends, the sector still has appeal because demand is recurring, essential and difficult to disrupt completely, even in recessions.
