Following the release of HY26 earnings last week, retailers JB Hi-Fi Ltd (ASX: JBH) and Wesfarmers Ltd (ASX: WES) traded roughly in line, with one rising and the other falling. Two retailers, with very different investment profiles. In a challenging market, which retail share is the better buy?
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The case for JB Hi-Fi
JB Hi-Fi is a high-growth, lean retail business that has shown real momentum since the early 2000s, becoming one of Australia's largest and most successful specialty retailers.
Its HY26 results were impressive, including:
- Revenue up 7.3% on the prior corresponding period (pcp) to $6.1 billion
- Net profit after tax up 7.1% to $305.8 million
- 32% growth in its New Zealand business
- Dividends up 23.5% to $2.10
Its share price has experienced some volatility lately, perhaps driven by slower-than-expected growth in The Good Guys brand, softer January sales, and consumer spending headwinds.
Its January sales drop-off has been attributed to a combination of temporary stock shortages and the impact of Black Friday, which pulled sales forward to November. And this shift in peak season aligns with CommBank IQ retail data. The data shows that sales peaked over the 2-week Black Friday period, up 4.6% year on year and 19.5% on the fortnightly average for Australian retailers.
Many analysts are seeing upside at current prices, and I tend to agree.
Over the last six months, the JB Hi-Fi share price has dropped circa 28%, but if you zoom out, it is up some 92% over the last five years. I think this is a better indicator of the retailer's performance. While consumer spending decline is a risk for this business, its strong branding as a discount retailer will keep it top of mind for budget-conscious consumers
The case for Wesfarmers
Wesfarmers is one of Australia's largest and most diversified retailers. It may not have JB Hi-Fi's growth momentum, but it is a solid operator, demonstrating consistent earnings performance and disciplined capital management across multiple economic cycles.
This is reflected in its HY26 results, which showcased stability in a challenging retail climate, including:
- Revenue up 3.1% on pcp to $24.2 billion
- EBIT up 8.4% to $2.49 billion
- Net profit after tax up 9.3% to $1.6 billion
- Dividends (fully franked) up 7.4% to $1.02
The Wesfarmers share price has also experienced some volatility, likely off the back of a decline in consumer spending and pressure on its lower-performing Target and Officeworks brands. Retail leaders Kmart and Bunnings both pick up their share of the slack, with both showcasing strong growth in the first half of FY26.
It's notable that Wesfarmers has delivered consistent growth in revenue, profit, and dividends throughout the 2020s, a decade that is proving a challenge for retailers.
Wesfarmers is the parent company to over 35 brands that extend beyond the retail sector, too. This wide footprint gives it exposure to a range of markets and a defensive business mix. Its brands outside the retail sector include online healthcare provider, Instascripts, data powerhouse, FlyBuys, natural gas provider, Kleenheat, and lithium miner, Covalent Lithium (a 50/50 joint venture with Mt Holland Lithium Project).
As with JB Hi-Fi, it's worth looking at the bigger picture for Wesfarmers. Over the last six months, its share price has fallen some 12% but has grown 65% over a 5-year period. For a business of this quality and scale, I think current prices can be considered a short-term dip.
The verdict
Both are good options, so it really depends on what you want to achieve.
JB Hi Fi has significant upside right now. So, in my view, it's the one to buy if you're looking for a growth share with exciting momentum, and your risk appetite will allow for some temporary volatility.
Wesfarmers remains a compelling, if not a hugely exciting, buy. Its scale, defensive business mix, and track record of disciplined execution make it a reliable performer. Its fully-franked dividend is also appealing. So, for me, it's the one to buy if you want a steady investment to hold long term.
