Buy, hold, sell: Coles and Woolworths shares

Australia’s two largest supermarket giants have released updates recently.

Do these updates make them buys for investors looking for blue-chip ASX shares? Let’s see what analysts are saying about them:

Coles Group Ltd (ASX: COL)

In response to Coles’ third-quarter update, Bell Potter has downgraded Coles shares to a hold rating with an improved price target of $22.80.

Bell Potter highlights that competition is increasing in the supermarket industry and that the liquor market remains challenged. And while Coles shares are trading at a discount, the broker thinks there are better value opportunities elsewhere in the consumer staples space. It explains:

We downgrade our rating from Buy to Hold. The shortfall between retail shelf price inflation and underlying food inflation in both WOW and COL has widened in the recent quarter. The competitive backdrop appears to be lifting and liquor remains challenged in a rising cost environment.

Trading a discount to WOW, there is a relative value argument to be made, particularly given the more limited exposure to discretionary channels in the near term, however we see more compelling GARP opportunities elsewhere in the consumer staples space at this juncture.

Woolworths Group Ltd (ASX: WOW)

Over at Morgans, its analysts note that Woolworths released a mixed trading update.

However, due to recent share price weakness, the broker has upgraded Woolworths shares to an accumulate rating with an unchanged price target of $37.30.

Commenting on the quarter, the broker said:

WOW’s 3Q26 sales trading update was mixed. Strong sales growth was offset by softer FY26 earnings guidance for Australian Food and NZ Food, as management chose to absorb higher fuel costs and invest in pricing. Management noted that value is becoming increasingly important, as customers become more cautious amid rising cost-of-living pressures. We reduce group FY26-28F underlying EBIT marginally by 1%. Our target price remains unchanged at $37.30. With a 12-month forecast TSR of 12%, we upgrade our rating to ACCUMULATE (from HOLD).

While absorbing higher costs and investing in pricing will weigh on margins in the near term, we believe this is the right strategy in the long-term as WOW works to improve its value perception with customers. These are levers within management’s control, and improving sales and volume momentum indicates the strategy is resonating. In an uncertain macro environment with soft consumer sentiment, WOW’s dominant market position and relatively defensive characteristics should support steady and resilient earnings growth.

The post Buy, hold, sell: Coles and Woolworths shares appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Woolworths Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Woolworths Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.