Sky City Entertainment's share price dropped by 4.6 per cent today after the company cut its earnings forecast for the current financial year.

By 12.45 pm the stock was at $3.72, down 18c from Thursday's closing level.

The company said earlier that it had revised its normalised 2011/12 net earnings downward to a net profit "in the low $140 millions".

In February, following a strong first half buoyed by good growth in Adelaide and Auckland and generally across the group, the company's guidance was for a profit in the high $140 millions for the year to June 30, up from $130.9m in the previous year.


"Since that time, we have experienced some softening in trading conditions, particularly in Adelaide," chief executive Nigel Morrison said in a statement.

"There is no doubt the retail environment in Australia at this time is challenging and particularly so in South Australia," he said.

This was recognised by the Reserve Bank of Australia's recent decision to reduce interest rates by 50 basis points to 3.75 per cent.

Revenue growth at Sky City's Adelaide property had slowed, the New Zealand/Australian dollar exchange rate had firmed and accordingly earnings before interest, tax, depreciation and amortisation in the second half was expected to be down on the prior period.

Sky City had anticipated growth at its Darwin property would be more significant in the second half than was now likely to be the case but said the result was more likely to be flat.

"While the New Zealand economy continues to show some signs of recovery, the pace of that recovery is somewhat slower than we would have hoped for," Morrison said.

The rate of unemployment in New Zealand has increased, which Morrison said was likely to be one of the causes of more cautious discretionary consumer spending.

Sky City's Hamilton and Queenstown properties maintained good growth but Christchurch will not meet the same earnings in this second half, Morrison said.

The company's annual result is due on August 15.