The Warehouse Group yesterday cut its profit forecast for the year ended July 27 by about 10% to between $84 million and $88 million.
The previous profit range was $94 million to $98 million.
Managing director Ian Morrice said in a statement to the New Zealand Stock Exchange that the key contributing factor to the profit revision was a marked downturn in consumer spending since the latter part of May.
That had "significantly reduced" the company's sales and margin expectations for the remainder of the year.
Sales for the month of May were 4.8% ahead of last year on a same-store basis and reflected an expected improvement in performance following a difficult third quarter.
"Customers responded well during this period to a strong seasonal offer in both apparel and home products.
"However, consumer confidence and retail spending has deteriorated markedly in recent weeks, in response to increasing inflationary pressures on fuel and cost of living."
The company's June and July sales were now forecast to fall well below previous expectations, he said.
On Thursday, the Briscoe Group slashed its interim net profit forecast and warned that difficult trading conditions would continue.
Briscoes downgraded its profit to between $2 million and $3 million but ABN Amro Craigs has provided a harsher estimation of the company's trading prospects.
ABN has cut earnings before interest, tax, depreciation and amortisation (ebitda) to $16.3 million for the full 2009 year from the actual 2008 result of $39.8 million.
The 2010 forecasts improves to $18.9 million.
ABN broker Chris Timms said most retailers' costs were largely fixed.
Negative comparable store sales and contractions in gross profit margin due to increased markdowns, had a disproportional impact on operating earnings.
The sharebroker was "underweight" in the retail sector.
Children's clothing retailer Pumpkin Patch is warning that conditions in its target markets of Britain and the United States have deteriorated in the second half of the year.
It also says its stock levels are "higher than ideal", its borrowings have increased and it is now taking a more cautious approach to expansion.
Directors told an Asia investor roadshow in Hong Kong that conditions in the US were "very tough" and likely to remain so next year.
Likewise, in Britain the economic indicators were pointing to a difficult environment, again with no improvement expected for the next 12 months.
Market expectations have been for a profit this year of about $22 million million to $23 million, down from $27.6 million.
But it is possible analysts will further trim earnings forecasts after the company's latest disclosures.
The company gave no forecast yesterday.
Pumpkin Patch has been borrowing money to fund its rapid expansion, with its debt levels having gone from virtually zero two years ago to $60 million for the six months to the end of February.
Market observers had expected the company's debt to have increased to about $75 million by the end of its July year.
However, the company said the figure was actually likely to be considerably higher - at between $85 million and $95 million.
Directors said the figure was expected to decrease significantly next year, due to strong cash flows from the operations in New Zealand, Australia and wholesale activities.
Inventory levels were also forecast to fall next year.
The company caused concern at the half-year mark when it revealed a $33 million increase in stock levels, to $119 million.
