UPDATE 1-Shares in retailer Carrefour slump after profit warning

* Brokers downgrade ratings on Carrefour

* Carrefour issued profit warning overnight (Adds detail and background)

PARIS, Aug 31 (Reuters) - Shares in Carrefour slumped on Thursday after the world's second-largest retailer warned 2017 operating profit could fall by around 12 percent.

Carrefour shares were down by around 10 percent in early trading, among the worst performing stocks in Europe, while Carrefour's French rival Casino also lost ground.

Late on Wednesday, the French supermarket retailer posted a steeper-than-expected fall in first-half earnings and cut its sales growth target, highlighting the challenges faced by new company head Alexandre Bompard.

HSBC analysts also cut their rating on Carrefour to "reduce" from "hold."

"Carrefour lacks momentum, has lost its scale advantage, and already has low profitability. The outlook is challenging," wrote HSBC.

Cut-throat competition hit Carrefour's margins at home and losses increased in Argentina.

Profits also declined as the integration of recently-acquired Eroski stores in Spain and Billa stores in Romania weighed on margins, although earnings rose in Brazil, the company's second-largest market after France.

JP Morgan cut its rating on Carrefour to "neutral" from "overweight," while analysts at Jefferies also downgraded the stock to "hold" from "buy."

"The biggest worry remains France, where headline French EBIT (earnings before interest and tax) missed estimates by 3 percent and declined by 113 million euros year-on-year on margins down 70 basis points," wrote JP Morgan analysts. (Additional reporting by Helen Reid; Editing by Keith Weir)