They're two of the biggest retail stocks on the S&P/ASX 200 Index (ASX: XJO) right now. Wesfarmers Ltd (ASX: WES) is a very diversified company with broad retail operations in a broad range of industries. It is also the owner of popular household retail names like Bunnings, Kmart, Officeworks, and Priceline. Woolworths Group Ltd (ASX: WOW) is one of Australia's supermarket giants and the owner of major brands such as Big W, BWS, and Dan Murphy's.
So when it comes to these two ASX retail powerhouses, which stock is the better buy for investors right now?
Are Wesfarmers shares a buy?
At the time of writing on Thursday afternoon, Wesfarmers shares have dropped 0.4% to $81.39 a piece. Over the past month, the shares have fallen 2.58% but they're still 14% higher for the year to date.
The share price was pretty stable between April and October this year. But then the retail company's annual general meeting (AGM) in late October slashed investor confidence and caused a sharp 15% sell-off. While some areas of the business saw year-to-date sales growth, management said that challenging trading conditions have affected its Industrial and Safety division.
The good news is that Wesfarmers shares have long been considered a good buy for passive income. The board of directors raised its fully-franked full-year dividend 4% year-over-year for FY25.
It hasn't done enough to convince analysts, though, and their verdict on the shares is still split between whether the stock is a buy or a hold. Data shows that the average target price is currently $81.25, implying a 0.38% downside at the time of writing. Although some analysts think the shares could fall another 22.02% to $63.60 over the next 12 months.
Are Woolworths shares a buy?
The supermarket chain's share price is 0.32% lower at the time of writing, at $29.32. Over the past month, the shares have climbed 4.47% but they're still 3.77% lower for the year to date, thanks to a sharp sell-off after the company posted a disappointing FY25 result in late August.
The company's first-quarter sales update in late October was much more positive, though, and I think there is a good chance the company's share price has reached the bottom and could soon rebound.
Again, the shares are a good buy for passive income. In FY25, the supermarket business handed out a total of 85 cents per share, fully franked. Bell Potter expects the ASX retail stock to pay a boosted fully-franked dividend of 91 cents per share in FY26 and then 100 cents per share in FY27.
Analysts are more bullish on the shares, too. Data shows that analyst sentiment is also turning, with 7 out of 17 holding a buy or strong buy rating on the shares. The remaining 10 have a hold rating. The average target price is $30.34; however, some expect this could be as high as $33. This implies a potential 3.4% to 12.5% upside for investors over the next 12 months, at the time of writing.
Which is the better ASX retail stock to buy?
My vote is that Woolworths shares are a better buy than Wesfarmers stock right now. While both powerhouses offer an attractive passive income for investors, it looks like the latest sell-off of Woolworths shares has created a great buying opportunity for a good quality stock. Whereas Wesfarmers shares have peaked this year and are set to tumble.
