Retail exchange traded funds were down sharply Friday while shares of Aeropostale (NYSE: ARO) and Gap (NYSE: GPS) fell nearly 20% after the companies offered weak profit outlooks as they continue to get squeezed by higher input costs.

Retail HOLDRS (AMEX: RTH) and SPDR S&P Retail ETF (NYSEArca: XRT) were down nearly 2%.

Gap fell 18% following its quarterly results. The retailer cut its full-year profit forecast.

“Management expects product unit costs to be up about 20% in the back half of 2011, and that inflation will likely completely offset any price increases, more dramatically for the value brands such as Old Navy and Outlet,” said BMO Capital Markets in a report Friday. “This confirms our view that Gap lacks the pricing power to offset mounting input costs.”