New Zealand shares fell, led by Warehouse Group as investors mulled a possible dividend cut after it downgraded first-half guidance. Fellow retailer Kathmandu Holdings paced the decline. Goodman Property Trust gained as investors hunted for yield.

The NZX 50 Index fell 3.321 points, or 0.1 percent, to 5558.057. Within the index, 26 stocks fell, 17 rose, and seven were unchanged. Turnover was $96 million.

Warehouse dropped 6.4 percent to $2.91, after New Zealand's largest listed retailer said first-half earnings to fall about 20 percent to $37 million in the six months ending Jan. 25, as a cold, wet spring and summer weather forced it to discount clothing and other seasonal merchandise. The red shed operator is under pressure to boost earnings after spending hundreds of millions of dollars sprucing up its stores and acquiring other brands.

"It was a pretty poor announcement this morning and people now will be questioning whether they can keep their dividend up at current levels," Mark Lister, head of private wealth research at Craigs Investment Partners said. "I suspect there is a dividend cut likely to come, which will potentially see a further downside from here."

Bricks-and-mortar retailers, particularly those in the rag trade, are squeezing margins with discount after discount to lure back bargain hunters who have headed online to cheaper, offshore sellers. Fellow retailer, Kathamandu Holdings dropped 3.4 percent to $2.02. Outside the benchmark index, Hallenstein Glasson, the fashion chain, fell 1.6 percent to $3.10. Michael Hill International, the jewellery chain, slipped 0.9 percent to $1.16 and Pumpkin Patch, the unprofitable childrenswear retailer, was unchanged at 23 cents.

"People aren't spending in the bricks-and-mortar stores like they used to," Lister said. Retailers are "having to give away a lot of margin to move stocks and still having to discount their prices quite heavily, which is eating into their profits."

Trade Me Group, the online auction house, was unchanged at $3.55.

Expectations that interest rates will largely remain on hold over the coming year, as inflation remains largely subdued both domestically and globally, has seen investors turn to yield paying stocks, like utilities and property investors, Lister said.

Goodman, the country's largest listed property trust, was the best performer on the day, advancing 3.9 percent to $1.20. Precinct Properties New Zealand gained 1.6 percent to $1.255. Kiwi Property Group rose 0.8 percent to $1.27. Property For Industry increased 0.7 percent to $1.54.

"That search for yield and the demand for good solid dividend payers is still very dominant as a theme," Lister said. "That makes complete sense when you think about where interest rates are likely to go in the coming year, which is probably nowhere."

Air New Zealand advanced 1.4 percent to $2.55. Tumbling oil prices signal cheaper jet fuel, and lower input costs for the national carrier, Lister said.

Spark New Zealand, formerly Telecom Corp and New Zealand's largest listed company, advanced 0.3 percent to $3.15.

Fletcher Building, the construction and building supplies company, fell 1.6 percent to $8.09.