Question 1: What’s the “trimmed mean” inflation rate? Why is this higher than the annual CPI measure of 2.8%?
Answer: The trimmed mean inflation rate for the 12 months to end September was 3.5%, compared to the annual CPI rate of 2.8%. The trimmed mean calculation uses the same basket of goods and services that the CPI considers but excludes the 15% of items where inflation was the highest, and the 15% of items where inflation was the lowest. In other words, it takes the middle 70% of items. This means it excludes items that were particularly volatile (in either direction). The reason that the trimmed mean rate is so much higher is that there are a couple of major items, in particular automotive fuel and electricity prices, that have experienced big declines in prices due to the application of Government subsidies and other events. These declines impact the overall inflation rate but get excluded from the trimmed mean calculation.
Question 2: I am not particularly happy about Myer (MYR) combining its business with Premier Investments and buying Just Jeans, Jay Jeans, Portmans, Dotti and Jacquie. It seems like a sell-out to placate Solomon Lew. As a shareholder in Myer, will I get to have any say in it?
Answer: Yes, shareholders of both Premier and Myer will have to approve the deal. It is expected (in the case of Myer) that an extraordinary general meeting will be held in late January 2025. If the deal is approved by shareholders of both groups, it will complete in February 2025.
Question 3: Why did Woolworths (WOW) share price get crunched today?
Answer: It lowered 1H EBIT guidance for Australian Food to be in the range of $1,480m to $1,530m, down from $1,595m in FY24 and lower than market consensus. Also, sales performance was a tad weaker than the market wanted, with comparable store sales in Australian Food increasing by just 2.2% in the first quarter, and comparable store sales growth in BigW down by 0.7%.
Question 4: ZIP Co (ZIP) has been on a bit of a tear with its share price going above $3.00. Do the brokers see more upside?
Answer: The brokers were pretty happy with ZIP’s first quarter result. Growth in the USA was ahead of forecast, with improved bad debt expense and a stronger balance sheet. They do, however, feel it is fully priced. On FN Arena, the consensus target price is $2.98, a fraction below the last ASX price of $3.02. The range of target prices is a low of $2.45 through to a high of $3.60.
