Why I'd buy Wesfarmers and Coles shares today

I think some of the best businesses on the ASX are worth paying a premium for.

And while their valuations might make some investors hesitate, I'm happy to pay more for companies with strong competitive positions and opportunities to keep growing.

Two ASX shares that fit that description are Wesfarmers Ltd (ASX: WES) and Coles Group Ltd (ASX: COL).

Here's why I'd buy both today.

Wesfarmers shares

Wesfarmers is one of my favourite ASX shares to buy and hold for the long term.

A major reason for this is the strength of its retail businesses, especially Bunnings and Kmart. Both have established leading positions in their respective markets, with strong customer loyalty and a reputation for providing excellent value.

I believe this gives them an advantage over competitors, especially when consumers are watching their spending.

And there's plenty of room for both businesses to keep growing. Bunnings has opportunities to expand its commercial operations and introduce new product categories, while Kmart is investing in its online marketplace and international Anko business.

I'm also optimistic about Wesfarmers' OnePass program, which encourages customers to shop across its retail brands. I believe these initiatives could help the company generate more revenue from its existing customer base while attracting new shoppers.

Another thing that keeps me positive is that Wesfarmers has other growth opportunities through its healthcare and lithium operations.

Of course, the shares aren't cheap. At around $81.14, Wesfarmers trades on a PE ratio of approximately 30.5 times forecast FY27 earnings, based on CommSec consensus estimates.

That's a significant premium to the broader market. However, I think it's justified by the quality of its businesses, their impressive returns on capital, and management's history of investing for long-term growth.

Coles shares

Another ASX share I'd buy is Coles, which I believe has an excellent long-term outlook.

One reason I like the supermarket giant is its enormous scale and established customer base. Millions of Australians rely on Coles for their weekly groceries, giving the company a dependable source of revenue.

And I believe its investments in technology and supply chain improvements could make it an increasingly profitable business.

Coles has spent heavily on automated distribution centres and online fulfilment facilities. These investments should help it improve efficiency, reduce costs, and serve customers more effectively.

There's already evidence that its online business is growing strongly. In the first quarter of FY27, eCommerce sales increased 22.9%, despite a more challenging environment for its supermarkets.

I think that's encouraging and demonstrates the opportunities Coles has to grow beyond traditional in-store shopping.

Of course, its recent trading update also highlighted some challenges. Intense competition, promotional spending, and rising costs are expected to keep first-half supermarket earnings broadly flat.

However, I believe Coles has opportunities to improve profitability as its investments in automation and technology deliver benefits over time.

At $22.54, the shares trade on approximately 23.5 times forecast FY27 earnings. Once again, that's certainly a premium valuation for a supermarket business.

But with its strong market position, opportunities to reduce operating costs, and potential for steady earnings growth, I believe that premium is reasonable. And I'd be happy to buy shares today with a long-term investment horizon.

Foolish takeaway

I think Wesfarmers and Coles shares are two high-quality Australian businesses that could continue rewarding shareholders over the coming decade.

Neither is a bargain at today's prices, and their valuations leave limited room for disappointing earnings. However, I believe their competitive advantages and opportunities to grow justify paying a premium.

The post Why I'd buy Wesfarmers and Coles shares today appeared first on The Motley Fool Australia.

Motley Fool contributor Grace Alvino has positions in Wesfarmers. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2026