GENERAL: MHI: Michael Hill International USA Business Review

8 Jun 2010 8:30 am

MHI 08/06/2010 GENERAL

REL: 0830 HRS Michael Hill International Limited

GENERAL: MHI: Michael Hill International USA Business Review

NZX Release - Michael Hill International US Business Review Michael Hill International has just completed a review of its US operations which it acquired from Whitehall Jewelers Chapter 11 process in July 2008. The 17 stores acquired were mainly based around the greater Chicago area with 3 stores further south in and around St Louis. For the past 20 months we have tested our retail concept in the US market, in particular our merchandise and marketing as well as our MH retail systems and processes. This test has been conducted in the face of some of the harshest retail and economic conditions in recent history. At the time of the acquisition the company stated that it was "a strategic acquisition to test our retail model in the highly competitive US market" and also noted that it did not expect to achieve profitability for several years.

After a full review of the business, including results achieved to date as well as operational and real estate issues, the company has made the decision to consolidate to a smaller platform of 9 stores, all of which are within the greater Chicago area. These stores will immediately be refurbished to bring all of them up to the company's latest global concept. This group of stores will then give the company the best possible platform and opportunity to position the brand in the US. The remaining 8 stores will be closed at the end of June 2010 with exit terms having been negotiated with the various landlords. The board remains positive about the US market and is aiming to position the brand to take full advantage of the financial recovery over the coming years.

The company expects to incur operating losses in the US in the vicinity of US$6.0m for the 2009/10 financial year (excluding costs associated with the above store rationalisation) and as a result of the above initiatives these losses should be materially reduced in the coming 2010/11 year. The total cost of closing the 8 stores will be approximately US$1.8m which includes lease termination costs and staff entitlements. These costs will be provided for in the audited financial statements for the 2009/10 financial year. This rationalisation of the US business will not affect other parts of the company and the company has plans to open up to 15 new stores in other markets over the coming year where it has a proven business model.

R.M. Hill 7/06/2010 Chairman Internet Home Page www.michaelhill.com All inquiries should be made to Mike Parsell CEO phone +61 403 246655 End CA:00195803 For:MHI Type:GENERAL Time:2010-06-08:08:30:52

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