When Tiffany & Co. (NYSE: TIF) cut its fiscal year sales and earnings guidance for a second straight quarter on Monday, stock in the company rallied over 7 percent.

Typically such lowering of expectations sends a stock price down, but not always. The world-famous New York-based high-end jeweler reported second-quarter net income of $91.8 million, or 72 cents per share, up 2 percent from last year.

But the company also lowered its fiscal year profit forecast to $3.55-$3.70, down from $3.70-$3.80. It also reduced its global sales forecast by 1 point to between 6 percent and 7 percent due to its high exposure to China's economic sluggishness compared to its competitors such as Blue Nile, Inc. (Nasdaq: NILE).

Despite the revised guidance, Wall Street sees that the worst is over, at least for the time being. Last week Goldman Sachs reiterated its Buy rating for the company. Other analysts had similar views.

"Tiffany results were not great but they sure weren't bad," said Brian Nagel, a retail analyst at Oppenheimer & Co. "We got through the most challenging time for them."

The company's stock price has fallen from a 52-week high of $80.99 last October to Friday's close of $58.50 -- a 27.7 percent decline.

But investors were bullish Monday, lifting the share price by as much as 7.61 percent to $62.95 Monday afternoon in heavy trading. This is much higher than what the stock was worth in 2009, a dismal year for a lot of retailers. In March 2009, Tiffany was trading at between $17 and $18 a share.  

So why did Tiffany lower its forecast?

"There'a a lot of macro-economic pressure, in China and Europe. They probably see there's still sales softness out there," said Nagel. "To the extent things are getting better, even modestly, is a good sign."

Michael J. Kowalski, Tiffany's chairman, said in the earnings announcement the company expects a reduced operating margin this quarter.

"Sales growth has been affected by economic weakness in a number of markets and by a very challenging prior-year comparison to a 30 percent increase in worldwide net sales," he stated.

In the previous quarter the company missed Standard & Poor's expectations of 8.7 percent global sales growth.  Instead global sales grew 7.6 percent, "as restrained spending by customers employed in the financial sector and substantial competitive discounting contributed to a $15 million sales shortfall in the Americas," according to a recent S&P report on the company.

The company has said it is in the process of opening 28 stores -- including nine in the Americas - and assuming control over the five it has with a local partner in the United Arab Emirates.