London, Dec 18 - 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.
Deutsche Bank cut its 2008 EBIT forecast for Carrefour by 4 percent to 3.36 billion euros ($4.83 billion) and its 2009 forecast by 10 percent to 3.21 billion.
Carrefour shares fell as much as 10.2 percent to 26.31 euros in early trading.
"We deem this to be a significant announcement because it probably highlights more pressure to come on a broad scale," said Shore Capital analyst Clive Black, warning the pain could extend to consumer goods makers such as Unilever and Reckitt Benckiser.
In a sign that suppliers are feeling the pinch, auto industry group ACEA said sales of commercial vehicles in Europe plunged 30.8 percent in November.
NO GOVERNMENT HELP
Britain's retailers are suffering more than most due to the country's exposure to the stricken financial services industry, high levels of personal debt and sliding house prices.
On Wednesday, administrators to British toys-to-DVDs chain Woolworths said it would close by Jan. 5, with the loss of 27,000 jobs, unless a last-minute buyer was found.
Business minister Peter Mandelson said on Thursday that failing retailers could not expect direct government aid.
"Now they have got to change, restructure, and keep up and match that competitive pressure if they are going to survive," he told Sky television. "And that is a tough lesson I am afraid for all of us in the economy."
Official data showed a surprise 0.3 percent monthly rise in UK retail sales for November, against expectations for a 0.6 percent decline.
This contrasted with a more recent survey from the Confederation of British Industry on Wednesday, which showed retail sales falling at their fastest pace in December for at least a quarter of a century.
"With unemployment rising sharply and households looking to tighten their budgets we expect to see further weakness in the data over the coming months," ING analyst James Knightley said.
Swiss retail sales data for October were also unexpectedly strong, showing a 2.9 percent annual rise, but Sarasin analyst Alessandro Bee said this was unlikely to last.
"If you look at exports, the recession will hit Switzerland," he said, a comment supported by November data from the country's watchmakers, which showed the first monthly decline in foreign sales since 2005 as the economic crisis ate into purchases of luxury accessories in key market such as Hong Kong, Japan and the United States.
News elsewhere in the retail sector was downbeat as well, with Sweden's retail institute halving its forecast for retail sales in the Nordic country this year to 2 percent, and predicting sales would be flat next year.
German fashion house Escada, whose dresses can cost 800 euros and evening gowns 4,000 euros, missed full-year earnings forecasts.