Carrefour warning hits retailers

By Mark Potter

LONDON (Reuters) - Europe's retail industry was thrust deeper into the gloom on Thursday following a profit warning from bellwether Carrefour and signs from the UK government that the sector can't expect bank-style bailouts.

The DJ Stoxx European retail share index dropped as much as 2.3 percent and was the weakest performing sector for much of the morning, despite better-than-expected official retail sales figures from Britain and Switzerland.

Analysts said the data, for November and October respectively, lagged some of the recent downturn in spending and included signs of weakness to come. The 1.5 percent rise in UK retail sales was the lowest annual increase since February 2006.

"It's the Carrefour warning that's the big story," said Daniel Lucht, analyst at retail researchers Verdict.

The French group, the world's second-biggest retailer, said late Wednesday it expected only a slight increase in 2008 earnings before interest and tax (EBIT) compared with previous guidance for about 7 percent.

The group, which runs more than 15,000 stores in 30 countries, blamed a downturn in consumer spending across its markets and the cost of promotions to maintain market share in the face of competition from hard discounters.

Analysts said the warning suggested a major deterioration in trading in recent weeks as the group had reiterated its previous guidance as recently as October.

"While yesterday's profit warning was not a surprise in itself ... the extent of it was," Societe Generale analysts said in a note, forecasting warnings might follow from peers such as Germany's Metro and Belgium's Delhaize.