Does Macquarie prefer Woolworths or Coles shares today?

Supermarket giants Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) shares are popular investments among Australian investors. 

They are considered defensive businesses that are less volatile than many other stocks listed on the ASX. 

With the S&P/ASX 200 Index (ASX: XJO) closing just below its all-time high yesterday, some investors may believe the market is expensive. Such investors may be looking to rotate their portfolio to include more defensive ASX 200 stocks. 

Consumer staples businesses such as Woolworths and Coles could be good candidates.

Coles shares have outperformed Woolworths shares by a wide margin over the past year, increasing 14% compared to a 10% decline for Woolworths.

Coles has also led Woolworths over the past 5 years, rising 14% compared to a 4% decline for Woolworths.

However, as many investors understand well, past performance is no guarantee of future performance. 

So, which ASX 200 supermarket giant is the better buy today?

Macquarie weighs in on the supermarket battle

In a 21 July report, Australian Consumer, the broker assigned both Woolworths and Coles shares an outperform rating. 

However, Coles was listed as its preference in the consumer staples sector. 

According to Macquarie, industry feedback suggests Coles has been taking market shares from Woolworths. 

The broker said:

Our preferred in Staples is COL, with earnings to benefit from supply chain investments and industry feedback continuing to point to in-store execution, though we see upside in WOW from business simplification and, in time, cost-savings. 

COL management has guided to a ~$130m reduction in costs in FY26, driven by the cycling of implementation costs from supply chain investments. We expect this, along with the group's SSI program and other tailwinds, to drive a solid EBIT outlook into FY26E.

Macquarie has assigned a price target of $24.10 to Coles shares. 

Meanwhile, a price target of $33.40 has been assigned to Woolworths shares. 

Coles also offers a slightly more attractive dividend yield than Woolworths, which may appeal to passive-income orientated investors. The dividend yield for Coles is 3.39%, compared to 3.09% for Woolworths.

Foolish Takeaway

Investors looking to rebalance their portfolio to include more defensive stocks might consider Woolworths and Coles shares. Macquarie expects both companies to outperform. However, the broker has a clear preference for Coles shares and recently named it its top consumer staples sector pick.