Woolworths Group Ltd (ASX: WOW) and Wesfarmers Ltd (ASX: WES) are two of Australia's most established retail businesses.
Both have strong brands, enormous customer bases, and a history of delivering returns to shareholders.
And while their shares aren't particularly cheap, I believe their long-term prospects make them worth considering.
Here's why I would be happy to buy and hold both.
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Woolworths shares
My first choice is Woolworths, which I think has an excellent position in the Australian retail market.
To appreciate the scale of its operations, consider that Woolworths recorded an average of 26.1 million customer transactions every week in FY26.
The company also estimates that 86% of Australians live within a 10-minute drive of one of its supermarkets.
That's an enormous reach, and I believe it gives Woolworths a significant competitive advantage.
Its Everyday Rewards loyalty program adds another dimension, with active membership reaching 10.9 million in the first quarter of FY27, according to last week's ASX update.
These customer relationships provide Woolworths with valuable opportunities to encourage repeat shopping, improve its offers, and grow sales.
And recent results suggest the company's efforts to improve its supermarket business are paying off. Australian Food sales increased 6.9% in the first quarter, supported by stronger customer transactions and improving sales volumes.
Admittedly, promotional activity contributed to this growth, so I wouldn't assume it can maintain that pace indefinitely.
Nevertheless, I believe Woolworths has plenty of opportunities to improve profitability as its investments in technology, distribution, and customer experience continue delivering benefits.
As for valuation, Woolworths shares are trading around $39.73 on Tuesday.
According to the latest CommSec consensus forecasts, this puts them on a forward price-to-earnings (PE) ratio of approximately 26.8 times FY27 earnings and 24.7 times FY28 earnings.
That's a premium, although it compares reasonably well with the median PE of approximately 28.2 times I worked out over the past five years.
With a forecast FY27 dividend yield of approximately 2.8%, I think Woolworths offers a reasonable combination of income and long-term growth potential.
Wesfarmers shares
Another ASX share I would happily buy and hold is Wesfarmers.
One thing I like about Wesfarmers is just how many different areas of Australian consumer spending it reaches.
Through businesses such as Bunnings, Kmart, Officeworks, and Priceline, the company has established a presence in everything from home improvement and everyday essentials to healthcare.
Its retail and health operations span almost 2,000 locations across Australia and New Zealand. But I think Wesfarmers has an opportunity to get even more out of that enormous network.
Its OnePass membership program is bringing customers closer to its different retail brands, encouraging them to shop more frequently and across multiple businesses.
In fact, Wesfarmers reported that OnePass members shop and spend approximately 3.3 times more than non-members.
I think this demonstrates how valuable its customer relationships could become as the company continues developing its digital capabilities.
Its businesses are also highly profitable. Bunnings, for example, delivered a return on capital of approximately 69% in FY26 according to its results release.
That gives Wesfarmers considerable financial flexibility to reinvest in its operations and pursue new opportunities.
At around $77.70, Wesfarmers shares trade on approximately 29.2 times forecast FY27 earnings, falling to 26.9 times for FY28 according to CommSec.
That's expensive, particularly compared with the five-year median PE of approximately 26 times I calculated.
However, I believe its strong brands, high-quality operations, and opportunities to grow across multiple industries justify paying a premium.
The forecast dividend yield of approximately 2.9% for FY27 is another positive.
The next decade
Over the next decade, I believe both companies can continue growing their earnings and dividends.
Of course, Woolworths will need to navigate strong supermarket competition, while Wesfarmers will need to keep its retail businesses performing well to justify its premium valuation.
But both have the track record and expertise to deliver on this, in my opinion.
Foolish takeaway
I believe Woolworths and Wesfarmers shares could continue rewarding investors for many years.
Both have built enormous customer networks that would be difficult for competitors to replicate, and I think they still have opportunities to become more profitable.
Their valuations are something to keep in mind, but I would be comfortable buying at current levels and allowing their earnings and dividends to grow over time.
