Wesfarmers Ltd (ASX: WES) and Harvey Norman Holdings Limited (ASX: HVN) are two of Australia’s premier retailers. However, they offer investors exposure to distinctly different markets within the retail sector.  

Let’s take a look at each to see which is right for your portfolio.

Wesfarmers

Though Wesfarmers has exposure to the resources and industrial sectors, it is Australia’s largest retailer. Through its Coles, Kmart, Target, Bunnings Warehouse and Officeworks businesses, Wesfarmers accounts for a significant portion of Australia’s non-discretionary spending.

Thanks to the savvy long-tenured management at its helm, Wesfarmers has forged a track record of reliability and consistency.

Looking ahead, with Woolworths Limited’s (ASX: WOW) Masters Home Improvement business out of view, Bunnings’ dominance over the lucrative DIY hardware market is set to continue. And while competition in the grocery channel from the likes of Aldi and Costco has taken its toll on some, Coles continues to power ahead.

At today’s prices, Wesfarmers’ shareholders stand to receive a dividend equivalent to 5% fully franked.

Harvey Norman

Harvey Norman is one of Australia’s most reputable discretionary retailers, with a leading position in white goods, furniture, electronics and more. However, Harvey Norman also generates a significant amount of its revenue and profit from its property portfolio.

With Gerald Harvey as Executive Chairman, shareholders can rest a little easier knowing the company’s founder (and a significant shareholder) is most likely supporting the company’s long-term success.

With a strong balance sheet, Harvey Norman shareholders are expected to receive a 5.2% fully franked dividend over the next 12 months.

Better buy

Given its exposure to discretionary retailing (things you don’t need to buy regularly, such as computers or furniture), Harvey Norman is arguably more vulnerable to the market cycle than Wesfarmers. That’s not to say it could go bust, but that its profits may ebb and flow more dramatically as the economy fluctuates.

Further, given its diversified portfolio of brands and significant market share, Wesfarmers is better suited for those seeking income from their investments, in my opinion.

Buy, Hold or Sell?

Both Harvey Norman and Wesfarmers are well run reputable businesses. However, I’d like to buy shares at lower prices than the market is offering us today. Indeed, both companies appear too expensive for me to justify an investment at these levels.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned in this article. You can follow Owen on Twitter @ASXinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.