The Christchurch-based retailer's before and after-tax profit for the period was $1.01 million compared with $3.56 million in the previous corresponding period.
No tax was payable.
Revenue of $227.1 million was down 10% on the previous period.
Same store sales fell by 6.1%.
An unimputed dividend of 1c per share will be paid, down from 3c last year.
Chairman Craig Boyce said the company operated in three key market segments - big-ticket retail, customer financing and the property market.
All three had been adversely affected in the reporting period.
"Retail demand has been down as a result of lack of consumer confidence."
In the big-ticket retail markets, furniture and flooring sales have fallen every month since January 2008 when compared with the previous corresponding months.
That was consistent with previous recessions where growth in the furniture and flooring sector had always been one of the first to turn negative, he said.
Appliance sales had proven more resilient, particularly during the Christmas trading period when new products such as flat panel televisions and falling prices attracted business.
However, intense competition had resulted in margins at both the wholesale and retail level coming under severe pressure.
In the property sector, Smiths City not only acted as an investment company owning its flagship store and head office in Christchurch, but it also sought out property development opportunities involving its retail operations.
Last year, annual result included a profit of $606,000 on the development of the Gore store.
This year, a similar development on the Gisborne store was sold in flat market conditions in December for book value.
The proceeds were used to reduce debt.
In the finance area, Smithcorp had performed well and continued to be a key strategic advantage for Smiths City, Mr Boyce said.
"Looking ahead, there are some positives emerging. In particular, we continue to find ways to reduce our cost base. Falling interest rates will benefit the finance company, which I am certain will prove to be a competitive advantage for us as we go forward."
As the tougher times continued, it was inevitable that some competitors would exit the market, Mr Boyce said.
Chief executive Rick Hellings said that, from experience, Smiths City knew that when conditions improved, the upturn in sectors in which the retailer operated tended to be strong as consumers had deferred their purchasing.
"We do need to be realistic - the market is unlikely to increase in size in the immediate future.
"Hence it will be our ability to achieve small but sustainable increases in market share combined with our ability to keep our expenses down and our stock and debtors under control that are the keys to improving our results over the next 12 months."
