Tiffany & Co said quarterly earnings fell a worse-than-expected 62 percent as jewelry sales suffered amid the recession.

Sales trends improved slightly in May, but not enough to boost the company's weak full-year outlook.

High-end stores like Tiffany and even more-affordable peers such as Zale Corp have taken a painful blow to sales in the past year as consumers confine their buying to necessities such as groceries. When they do spend, consumers are seeking deep discounts.

As other jewelers cut prices to entice shoppers, and some like Whitehall Jewelers Holdings and Friedman's Inc went bankrupt and held fire sales, Tiffany earlier this year vowed to hold the line on prices. Many investors and analysts argue that discounting would tarnish the Tiffany brand in the long term.

While the weak economy has hammered sales, the rate of sales decline is easing, with results in the Americas improving slightly and other markets improving more, Tiffany CEO Michael Kowalski said in a statement. But he warned it was too early to draw conclusions.

Tiffany's net profit fell to $24.3 million, or 20 cents per share, in its fiscal first quarter, ended on April 30, from $64.4 million, or 50 cents per share, a year earlier.

Analysts' average earnings forecast was 21 cents per share, according to Reuters Estimates.

Sales dropped 22 percent to $523.1 million. On a constant-currency basis, sales fell 18 percent.

Tiffany said it still expects full-year earnings of $1.50 to $1.60 per share from continuing operations, and a worldwide sales decline of about 11 percent. Analysts, on average, expect a profit of $1.57 per share.

Earlier in May, Tiffany said it bought bankrupt handbag maker Lambertson Truex in a bid to expand its array of leather goods.

Tiffany shares were down 2.1 percent to $27.53 in premarket trade after closing at $28.13 Thursday on the New York Stock Exchange.

(Reporting by Aarthi Sivaraman; Editing by Lisa Von Ahn and John Wallace)

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