Tiffany & Co gave a holiday quarter profit outlook that missed Wall Street expectations, and fears that its gross margin could slip further and the pace of sales gains is slowing sent shares down nearly 7 percent.

The upscale jeweler reported higher-than-expected quarterly earnings, helped by sales of more expensive jewelry and said that its sales gains would continue in the holiday season.

But that pricier jewelry also hurt gross margins, and the fear the gross margins could slip further worried investors, Morningstar analyst Paul Swinand said.

Also worrisome for investors is that Tiffany left unchanged its full year forecast for a high-teens increase for the full year, which ends in late January, he said.

The worry is that there is a turn in the margin and slowing down of the pace of sales growth, Swinand said.

Tiffany said it expects fourth quarter earnings per share of $1.48 to $1.58, below the $1.63 Wall Street analysts were expecting, according to Thomson Reuters I/B/E/S.

Tiffany's gross margin, a measure of the profitability of jewelry sold, edged down 0.6 point to 57.9 percent, largely because it sold pricier jewelry, which the company said has lower margins.

The upscale jeweler expects sales to rise at a low-teens percentage rate for the holiday quarter.

Still, Tiffany's sales, excluding the effect of currency translations, rose 17 percent globally to $821.8 million in the third quarter ended on October 31, while sales at stores open at least one year rose 16 percent.

Despite volatile stock markets, sales grew in every region. The fastest growth came from Asia where they rose 40 percent in the quarter, taking into account the effect of currency. China, the fastest growing luxury market, was a standout.

At Tiffany's famed Fifth Avenue flagship in Manhattan, sales rose 24 percent, helped by the record number of tourists visiting New York.

The results echo those of upscale department stores Saks Inc , Neiman Marcus and Nordstrom , which all recently reported that high end shoppers are still spending.

Even in Europe, where leaders are trying to manage fears about the future of the euro, sales rose 15 percent.

Tiffany reported net income of $89.7 million, or 70 cents per share, for the quarter, up from $55.1 million, or 43 cents per share, a year earlier and above the 61 cents a share that analysts were expecting, according to Thomson Reuters I/B/E/S.

(Reporting by Phil Wahba; Editing by Lisa Von Ahn, Dave Zimmerman)