Supermarket giants Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) have been locked in a rivalry for decades.
From grocery prices and product ranges to revenue growth and share price performance, the two retailers compete across nearly every corner of Australia's supermarket sector.
In recent weeks, both ASX supermarket shares have delivered strong gains, but the pace has been closely matched. Woolworths shares are up around 12% this month, while Coles shares have risen roughly 10%.
However, the story looks very different when zooming out to the 2026 performance so far.
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Woolworths: Strong rebound, valuation questionable
Woolworths shares have staged a solid recovery this year, rising around 30% year to date. That strength reflects improving investor sentiment after a period of operational and cost-related challenges, as well as renewed confidence in the company's core supermarket operations.
The market has also responded positively to signs of stabilising margins and a more disciplined approach to capital allocation. Woolworths remains the dominant player in Australian grocery retail, giving it scale advantages in procurement and distribution.
However, not all analysts are convinced the recent rally can continue.
Bell Potter is currently cautious on Woolworths shares, assigning a hold rating. The broker has set a price target of $35.50, which sits below the current share price of $38.12.
From an income perspective, Bell Potter expects Woolworths to pay dividends of 91 cents per share in FY26 and 94 cents in FY27. This translates to forward dividend yields of approximately 2.4% and 2.5%, respectively.
For investors, this suggests Woolworths may be trading ahead of fair value following its strong run.
Coles: Steadier growth and dividend appeal
Coles shares have also performed well, though their gains have been more modest than Woolworths'. The stock is up around 9% so far in 2026.
Unlike Woolworths, which has seen a sharper rebound, Coles has delivered a more gradual and steady performance profile, reflecting its reputation as a defensive, operationally disciplined retailer.
Investors continue to favour Coles for its consistent execution, stable earnings base, and reliable dividend profile. While it lacks Woolworths' scale advantage, it has built a reputation for efficiency and steady returns.
UBS remains positive on Coles shares, maintaining a buy rating with a $25.50 price target. Based on the current share price of $23.37, this implies potential upside of approximately 9%.
From an income perspective, UBS forecasts dividends of 77 cents per share in FY26 and 89 cents in FY27. This equates to forward dividend yields of approximately 3.3% and 3.8%, respectively.
Buy, hold, or sell?
Both Woolworths and Coles remain high-quality ASX supermarket shares with strong market positions and reliable earnings.
However, they are currently offering very different investment profiles. Woolworths appears to be priced for growth following a strong rally, while Coles offers a more attractive dividend yield and modest upside, according to analysts.
For investors, the decision may come down to whether they prefer Woolworths' dominant scale or Coles' steadier income-focused profile.
