UK Retail continues dire

All,

Next PLC have been reporting a further slow-down in their Q3 to October 26th. We will stick with our Matalan position and feel somewhat stuck with our New Look position.

Implications:

- Matalan: Sturdy company, well positioned for down-turns in general - had reported one of the three months in Next’s Q3 already. Impact: bad, but entirely survivable.

- New Look: Going from low to lower, despite plans for recovery. Balance sheet was never sufficiently delevered and liquidity is all via RCF. Fully exposed to high street weakness. Q1 reporting was only through June. Thus the entire Q3 is still coming. Online sales have been growing in the sector, so New Look could make up for some lost sales there.

Other data points:

- Matalan, who earlier this month reported through August had been guarded about their end-of-summer performance, and had signalled further deterioration.

- The BRC had signalled that September had been the worst on record (records keep tumbling).

- Kantar figures tend to be distorted, because they won’t take into account store numbers per retailer, but in total the direction is all the same.

Wolfgang