A Lord of the Rings 'Quadrilogy'?

*** Matalan takes a tumble

*** As if M&S doesn't have enough challenges...

*** Smokers delight...'What do you want to watch'...Europe's 'weak spot'...and mor -------------------

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- Matalan, one of the last UK chains to buck the grim mood amongst the retailers, has finally succumbed to the consumer's lack of spending.

- According to the discount store, its like-for-like sales toppled 8% during March and April, while 7% fewer customers bothered even visiting the shop during the first nine weeks of the year.

- Matalan's prospects were looking considerably better than its ailing high street counterparts, after the group reported a 3.5% rise in its second-half gross margins earlier this year. But pre-tax profits for the 52 weeks to end-February fell 11% to £56m. The retailer also took a knock from a £27m provision for loss on the sale of its jean's brand Lee Cooper.

- 'This is a pretty poor performance and was worse than we were expecting,' Shore Capital's John Stevenson said yesterday. 'We are set to take our numbers back by more than 10% for 2006.' Matalan's share price fell 5% to trade at 183p.

- General retailers felt the pinch following Matalan's results, as the sector fell 1% yesterday. Both Whitbread and Next closed as top blue chip losers, down 3% and 2% respectively.

- Marks & Spencer also fell 2%, as the struggling chain prepares to report a predicted 19% fall in pre-tax profits in three weeks' time. What's more, a brewing rift between board members Kevin Lomax and current chairman Paul Myners - with Lomax determined to have the latter booted out of the boardroom - is not a welcome distraction for embattled chief executive Stuart Rose.

- And the news was no better for CD-seller HMV Group, who also reported a 2% fall in like-for-like sales in the last four months to 23 April. For the year, sales inched up 1% - but the group's share price closed 4% lower at 218p.

- Weak retail figures sent the FTSE 250 index lower, down 0.6% to 6,744. The FTSE 100, however, managed to dodge the trend, closing 21 points higher at 4,882. How did it manage this? By taking note of America's crude oil supplies, which, according to the Department of Energy, rose 2.6m barrels. This pushed the likes of oil-dependent British Airways up 1.5% yesterday. The All Share index also gained 0.3%, to trade at 2,431 ------------------ - British consumers may not be buying clothes...but we're still puffing away at our Lucky Strike fags. That's according to British American Tobacco, who reported higher first quarter profits, up from £575m to £625m. The group's share price closed as a top blue chip gainer, up 2%.

- Despite the good results, BAT's chairman Jan du Plessis warned shareholders to not get too used to this, as comparisons would get harder as the year progressed. The tobacco sector closed 1% up - while rival Gallaher added 1.3%.

- BSkyB fell 0.5% on Wednesday, even though the group said underlying profits rose 52% in their third quarter. According to Murdoch Jnr, James, 95,000 new subscribers joined Sky in the first three months of the year - well ahead of the forecast growth of 70,000.

- So what's the problem with BSkyB? Well, investors voiced their fears over the number of customers who cancelled their Sky subscriptions - up to 11.1% from 9.8% the previous quarter. It's clear the group is more concerned about its new customers, as opposed to wooing back the old disgruntled ones. That's a fair strategy by BSkyB, but cannot continue for much longer. Why? Because one third of UK households already subscribes to Sky: which means BSkyB cannot be far off saturation point.

And across the pond...

- Imagine for a moment a 'Lord of the Rings 'quadrilogy'. The thought could easily lead to a mass of shattered viewers tugging out bunches of hair. But it was bad news for Time Warner: as no follow-up to The Return of the King knocked their film profits by 2% this first quarter in comparison to 2004's first three months, down to $328m.

- According to Time Warner, its cable television branch made up for the film loss, ensuring flat first quarter profits for the world's largest media group. Net profit came in at an uninspired $963m, while revenues were up 3% to $10.5bn. Good enough for investors, who were fearing the worst, as the share price traded 3% up in New York.

- And the European Central Bank held the region's interest rates steady at 2% for the 23rd straight month. It seems that the hawks in Europe are having their wings clipped...as weak data throughout the region, including poor eurozone growth and high unemployment, is bringing back softer language from ECB President Jean-Claude Trichet.

- 'The risks to real activity are clearly on the downside,' ECB's chief Otmar Issing said yesterday. 'There will be a 'weak spot' in the second quarter,' he added. Hmmm, ya don't say.. Until tomorrow,

Heather D'AltoMoney Mornin