Updated from 7:55 a.m. EDT

Home improvement retailer

Home Depot

(HD) - Get Report

warned investors Thursday that its quarterly profits would be lower than expected due to falling prices for lumber and other building materials.

Home Depot shares hit a new 52-week low, finishing down $13.94, or 28%, at $35.

The Atlanta-based retailing giant said it expects third-quarter profits of about 28 cents a share, 3 cents lower than the 31 cents per share that Wall Street analysts estimated, according to market research firm

First Call/Thomson Financial

.

If the company's revised estimate proves correct, the company will have increased profits 12% from the same period a year ago. However, Home Depot cautioned that year-on-year comparisons are skewed because of a bump in sales last year due to damage from Hurricane Floyd and sales related to Y2K in the second half of 1999.

One analyst said the real problem is a slowdown in consumer expenditures.

"The more important message is that there is a general slowdown here that goes beyond lumber, building materials and Hurricane Floyd," said Douglas Gordon, who covers Home Depot for

Banc of America Securities

. Gordon downgraded Home Depot after the second quarter to a buy from a strong buy, citing concerns over rising costs from expansion and wages and a sales slowdown.

Gordon, whose firm does no underwriting for Home Depot, said the market can expect other retailers to make similar announcements in the coming months. Retailers typically release earnings about a month after companies in other sectors.

"When Home Depot misses, the market almost automatically prices in misses for everyone else," he said.

Indeed, stock in other retailers fell Thursday. For example,

Best Buy

TheStreet Recommends

(BBY) - Get Report

was off recently $5.50, or 11%, to $43, while

Circuit City

(CC) - Get Report

was off 88 cents, or about 4%, to $18.44.

And Home Depot competitor

Lowe's

(LOW) - Get Report

-- the world's second-largest home improvement retailer -- was off $5.19, or 12.6%, to $35.88. Lowe's released a warning Oct. 6 that said the company's sales will be lower than estimates in the third quarter.

In comparable stores -- the stores open at least a year -- Home Depot anticipates reporting a 4% increase in sales, 2% lower than previously expected due to the price deflation in lumber and building materials.

On the news, analysts rushed to revise their forecasts, and some downgraded Home Depot's stock. In one case, investment bank

Jefferies & Company

lowered its rating to hold from accumulate, and reduced its 12-month price target to $38 to $40, from $65.

Another firm,

Robertson Stephens

, kept its buy rating, but nonetheless cautioned investors. "After the stock settles, we could continue to recommend purchase of this core consumer name for patient investors," analyst Alexandra DalPan of Robertson Stephens wrote in a report published Thursday.

The same factors that will dent third-quarter earnings are also expected to impact fourth-quarter results. For the full year, the company lowered its expected earnings per share to $1.16 to $1.17. Analysts expected the company to earn $1.25 for the full fiscal year.

Home Depot is scheduled to report quarterly earnings Nov. 14.