By Simon Louisson of NZPA

Wellington, June 27 NZPA - Retailers stocks were smacked around today after The Warehouse downgraded its profit guidance by 10 percent.

Yesterday, shares in retailer Briscoe Group fell 12.7 percent to 96 cents after it announced its second profit warning in a month.

Overall, it was an ugly day on the sharemarket, where the top 50 index fell 1.9 percent to a 2-1/2 year following Wall Street's 3 percent slump. The Warehouse fell 32 cents to $4.19 and Briscoe fell another 9 cents, 9 percent, to 90 cents.

Other retailers were similarly hit -- apparel retailer Hallenstein Glasson was down 14 cents to $2.68, and jewellery retailer Michael Hill International down 7 cents to 74 cents.

Christchurch-based retailer Smiths City Group reported today its net profit fell 1.7 percent to $3.56 million in the year to April.

Its shares were untraded today and last traded at 40 cents. They have fallen from 69 cents in July.

AMP Capital Investors head of equities Guy Elliffe said the outlook for shop keepers was "challenging" with already heavily indebted consumers hurting from rising petrol and food prices and higher interest rates.

"We've been talking for quite a long time about a rebalancing between the domestic economy and the export economy, and the retailers were always going to be a sector that were most disadvantageously positioned with regard to that transition, so it's not a major surprise this weakness in the sector."

In its profit warning today, The Warehouse, which operates the "Red Shed" general stores and The Warehouse stationery chain, said there had been a dramatic slump in sales towards the end of last month.

Chief executive Ian Morrice said people's shrinking discretionary spending was starting to hurt.

"In particular (demand fell) across seasonal categories," he said.

"In other words -- discretionary spending has slowed."

The Auckland-based company, possibly being lined up for takeover by supermarket chains, Foodstuffs and Woolworths, downgraded its expected net earnings for July year to between $84 million and $88m, including warranty reversal provisioning of $7.2m.

Mr Morrice said customers in May snapped up apparel and home products but consumer confidence has crumbled in response to increasing inflationary pressures on fuel and the cost of living.

On Wednesday, the Westpac McDermott Miller consumer confidence survey showed confidence slumped to a 17-year low.

The survey recorded a massive fall in consumers' attitudes towards buying a major household item -- down 19 points from plus 8 percent to minus 11 and the second lowest on record.

Also today, GDD data showed the economy shrank in the first quarter, the first fall for more than two years. Economists said recession -- two quarters of negative growth -- is a distinct possibility.

The Warehouse has brought forward its sale period by three weeks, which will hurt margins, but Mr Morrice said clearing out stock was vital going into the new financial year.

All retailers said they would be keeping a tight rein on discretionary spending.

Rod Duke, managing director of Briscoe, which operates the Briscoes Homewares, Living & Giving, Urban Loft and Rebel Sport chains, said his company would be "taking significant further actions to make additional cost savings," in the second half of the year.

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