News that Sainsbury’s plans to sell Argos for £120m and double down on its “food first” strategy has pushed supermarket stocks back into the spotlight. When a major player shifts focus this sharply, it can change how investors think about returns, risk and income potential across the sector. This article looks at how that move connects to our Defensive Consumer Staples screener and what it might mean for supermarket and food retail stocks exposed to the same news. You will see 3 stocks from the screener that appear positively exposed, and why each might deserve a closer look or a wider berth.

Target (TGT)

Overview: Target is a large US general merchandise retailer that sells everything from apparel and beauty products to food, household essentials, electronics and home goods through a nationwide store network and Target.com.

Operations: Target generates about US$106.4b in annual revenue from its US retail operations, with all reported revenue coming from customers in the United States.

Market Cap: US$66.3b

Target offers a mix of defensive grocery and essentials exposure alongside higher margin categories like beauty, home and owned brands, which together support a 3.2% net margin and a 21% ROE. The company is leaning into digital, AI and retail media through Roundel and new partnerships, while refreshing stores and ranges with concepts such as Target Beauty Studios, exclusive baby and home collections and larger format stores that management reports are outperforming expectations. At the same time, the company has high debt, recent earnings pressure, insider selling and product recall risks, so execution on this turnaround remains important. For defensive investors watching the shift toward “food first” models, Target’s combination of staples exposure, omnichannel reach and reinvestment plans raises questions that numbers alone do not answer.

Target’s push into digital, owned brands and retail media could be masking where the real upside or risk sits. Get the full picture in the 4 key rewards and 2 important warning signs

Coles Group (ASX:COL)

Overview: Coles Group is a large Australian supermarket and liquor retailer that sells fresh food, groceries, general merchandise and drinks through its national store network and coles.com.au, alongside financial services and the flybuys loyalty program.

Operations: Coles Group generates most of its revenue from supermarkets at about A$40.7b, with a further A$3.6b from liquor and A$0.6b from other activities.

Market Cap: A$32.2b

Coles Group sits right at the heart of the “food first” theme that Sainsbury’s is leaning into. Almost all of its business comes from essential groceries and liquor, and it is investing heavily in automation, digital ordering and Ocado powered fulfilment to improve product availability and cost to serve. Earnings have come under pressure recently and the current P/E is high, so you are not getting this defensive profile for free. High debt and wage and energy inflation also keep margin pressure in focus. For investors who want a defensive supermarket with online ambitions and cost out programs that still have to prove their full benefit, Coles Group is a stock that deserves closer scrutiny.

Coles Group’s “food first” profile and high P/E hint that the market may be pricing more than pure stability. See how earnings pressure, debt and cost programs fit together in the analysis report for Coles Group

Loblaw Companies (TSX:L)

Overview: Loblaw Companies is a large Canadian food and pharmacy retailer that runs supermarket, discount and specialty banners alongside Shoppers Drug Mart pharmacies, private label brands like President’s Choice and no name, and financial services through PC Financial and the PC Optimum loyalty program.

Market Cap: CA$76.2b

Loblaw Companies gives you concentrated exposure to the “food first” theme that is back in focus after Sainsbury’s Argos exit, with core grocery and pharmacy demand, hard discount formats that are winning value seeking customers and strong digital engagement through PC Optimum and e-commerce. Earnings and ROE are strong, and management is returning significant capital through buybacks and a higher dividend. However, the stock trades on a higher P/E with forecast revenue and EPS growth that are only modest. Combined with high debt and regulatory scrutiny on food pricing, this makes Loblaw a stock where the quality story is clear but the balance between resilience, valuation and risk deserves a closer look.

Loblaw Companies looks like a steady grocery and pharmacy powerhouse, yet the real story may sit in how its quality profile, buybacks and higher dividend stack up against valuation pressure. See the full picture in the 1 key reward and 1 important warning sign

The three stocks covered here are only a starting point, since the full Defensive Consumer Staples screener has identified 15 more supermarket and food retail companies with equally compelling narratives in the Defensive Consumer Staples (Supermarkets & Food Retailers) screener. Use Simply Wall St to identify and analyze the specific catalysts, risks and income profiles that matter to you so you can focus on the highest conviction ideas in this space.

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Seeking Fresh Alternatives Beyond Supermarkets

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.