Tiffany & Co posted a lower quarterly profit on Monday, but trumped Wall Street's expectations, as the upscale jeweler worked to keep a tight lid on costs, despite being stung by lower sales in the period.

Tiffany also forecast a decline in sales for the current year and disappointing earnings, saying it had not seen any signs of a turnaround in its fortunes, yet.

Still, its shares jumped 9.5 percent, in a mix of its better-than-expected profit and its full-year outlook, which was realistic, even if below expectations, said Edward Jones analyst Matt Arnold.

More than anything else, (it was) the upside surprise in the current quarter, Arnold said.

It is smart for them to approach the business with a mindset that if things do turn up, they can respond appropriately at that time instead of planning for it and having too much costs on the table, he added.

Stores that sell high-end merchandise were among the last to face the repercussions of the recession, but have also fallen prey to consumer cutbacks in recent months.

Tiffany said its sales sank more than 20 percent in the current quarter to date, in the latest sign that consumers around the world -- even affluent ones -- were cutting back on discretionary purchases as the economic downturn showed no signs of abating.

Tiffany has clearly not been immune from global economic turmoil in recent months and we are taking a cautious view to business conditions in 2009, Chief Executive Michael Kowalski said in a statement.

FLAGSHIP SUFFERS

Tiffany's net profit fell to $31.1 million, or 25 cents per share, in the fiscal fourth quarter ended January 31, compared with $127.4 million, or 96 cents per share, a year earlier.

Excluding one-time items such as restructuring, Tiffany earned 85 cents a share, topping the average analyst estimate of 78 cents a share, according to Reuters Estimates.

Sales fell 20 percent to $841.2 million, with the decline in the Americas region hurting it the most, Tiffany said.

Quarterly sales fell 3 percent in the Asia-Pacific region and 2 percent in Europe.

Even its flagship store in Manhattan, which is usually inundated with tourists, faced a 34 percent sales decline in the past quarter.

For the current fiscal year, the New York-based retailer said it is assuming a sales decline of about 11 percent. It also expects full-year earnings of between $1.50 a share and $1.60 per share from continuing operations.

Analysts expect it to earn $1.73 a share on that basis.

While Tiffany is keeping a tight lid on costs, the jeweler said it will continue with opening 13 new stores in the year, new products and focused marketing to attract shoppers.

The New York-based retailer recently disclosed plans to close its ailing Iridesse pearl jewelry stores. It has offered early retirement packages to about 800 employees, of which 600 took the offer, Tiffany said.

Those actions would result in a 10 percent cut in its worldwide staff, and about $60 million in pre-tax savings in 2009, Tiffany said.

Its shares were up $1.92 at $22.15 on the New York Stock Exchange.

(Reporting by Aarthi Sivaraman; Editing by Steve Orlofsky, Dave Zimmerman)

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