For more evidence of economic woes beyond Wall Street, look no further than Main Street. J.C. Penney (JCP) today warned that first quarter earnings and sales will come in well below expectations, becoming the latest in a string of retailers to ratchet down guidance.

What is remarkable is how quickly the business has deteriorated. As of Jan. 1, Thomson Financial had predicted year-over-year first quarter earnings growth of 8 percent for consumer stocks, which in addition to retailers, also include homebuilders and auto companies. Today, that prediction of growth has been replaced by one of contraction. Thomson now expects the group to report an 8 percent drop. Excluding homebuilders, which account for a large chunk of the swing, earnings are still expected to shrink by 2 percent.

Take J.C. Penney. Just over one month ago, the company predicted first quarter earnings of 75 cents to 80 cents. New guidance issued today pegs that amount at 50 cents a share. The earnings free fall is mainly the result of plummeting sales. For March, sales at stores open at least a year are now expected to fall by double-digits, compared with a prediction of a low-single-digit drop back in February.

“Consumer confidence is at a multi-year low,” said Myron Ullman, III, chairman and chief executive of J.C. Penney. “J.C. Penney counts half of American families as its customers, and they are feeling macro-economic pressures from many areas, including higher energy costs, deteriorating employment trends and significant issues in the housing and credit markets.”

As of midday, shares of JCP had plunged $2.84 cents, or 7 percent, to $37.68, helping to drag down the broader S&P Retail Index.

JCP isn’t the only retailer to see its customers curtail spending. For every time a consumer-related company has raised forecasts this year, there have been more than three instances of guidance reductions, according to Thomson Financial. That compares with a ratio of 1-to-2 for the broader S&P 500. Retailers that have reduced their earnings outlook include Wal-Mart (WMT), TJX Companies (TJX), Kohl’s, (KSS) Nordstrom (JWN) and Limited Brands (LTD) — though none of those downwardly revised earnings estimates were as big as J.C. Penney’s. And retailers still have another month to go before they can close the books on the first quarter, meaning that a further tempering of expectations is likely.

“On the surface, discretionary spending was awful last year,” said David Dropsey, senior research analyst with Thomson Financial. “But if you dug beyond the homebuilders, it was clear that retailers, restaurants and hotels were doing okay. This year, the curb on spending seems to be much broader based.”

The big question is whether checks set to arrive in consumers’ mailboxes in about two months as part of a government financed stimulus package, will have the desired effect. Goldman Sachs analyst Adrianne Shapira expects second half sales to pick up as consumers start spending that money, which could total as much as $1,000 to $2,000 per family. She also points out, in a research note published Friday, that the first quarter contributes the least amount to full-year sales. That makes the period the most susceptible to earnings shortfalls if sales miss expectations.

Not everyone is a big believer that the government issued checks will provide the necessary magic bullet. “While the economic stimulus package may provide some temporary benefit, we expect the continuation of a difficult environment over the course of 2008,” Ullman said. Better to temper expectations now than later.

Perry Ellis (PERY), which earlier this year bought the Laundry label from Liz Claiborne, is in talks to bring back the brand’s founder, designer Shelli Segal, Fortune has learned.

The discussions with Segal are part of a broader plan to revive the label, known for its dresses, which underwent a series of changes following Liz Claiborne’s 1999 acquisition. Headquarters were moved from Los Angeles to New York, and following Segal’s split from the company in 2007, the name was changed to Laundry By Design from Laundry by Shelli Segal.

Sales of Laundry merchandise today are estimated at $30 million, down from $100 million when Liz Claiborne acquired the brand.

Perry Ellis President Oscar Feldenkreis told Fortune that he is moving the Laundry studio back to L.A. to recapture the label’s California heritage. He has also hired a new design team, many of who, including Claudia Cordic, worked for Laundry as part of the original team. Perry Ellis also plans to change the company’s name back to Laundry by Shelli Segal and relaunch the label for the holiday season. “I’ve met with Shelli and we are talking to her about coming back as a consultant,” Feldenkreis said. Segal was not immediately reachable for comment.

The moves by Perry Ellis are part of a broader trend in fashion, where companies ranging from Gap to Lord & Taylor are wooing big-name designers to try to revive ailing brands.