Tiffany & Co Inc. (TIF) on Friday reported higher quarterly profit as sales of higher-priced jewelry in the United States offset weakness in Japan and Europe and higher costs for diamonds and precious metals.

"They are building up their market in very high-end jewelry and it's selling," said Stacey Widlitz, analyst at Fulcrum Global Partner, referring to two-, three- and four-carat diamonds. She has a "buy" rating on the stock.

The luxury jeweler also increased prices on some jewelry in the United States in the last week of April to try to offset higher costs.

Tiffany shares rose 1.3 percent in midday trading.

Tiffany saw sales at stores open at least a year fall 8 percent in Japan, which just last year accounted for 22 percent of its sales. It was the fifth straight quarterly decline in Japan, where sales have been hurt by deflation and Tiffany's decision to raise prices on silver jewelry in order to protect the status of its brand, analysts have said.

The company said its earnings for the fiscal first quarter ended April 30 rose to $40.1 million, or 27 cents per share, from $36.8 million, or 25 cents per share, in the year-earlier period.

Wall Street analysts on average forecast earnings of 24 cents per share, according to Reuters Estimates.

Sales rose 12 percent to $509.9 million and sales at stores open at least a year, a key measure for retailers, rose 5 percent. The weak dollar, which boosts the dollar-value of dales in other currencies, added a percentage point to each sales measure, the company said.

Same-stores sales rose 11 percent in the United States and 2 percent in Europe, the company said.

The strength in U.S. sales underlines the trend of luxury products doing well while lower-end consumers are being hurt by higher gas and energy prices, as evidenced by Wal-Mart Stores Inc.'s (WMT) disappointing first-quarter earnings Thursday.

"If you're in the market for a four-carat diamond, I don't think you are worried about your gas," Widlitz said.

The company forecast an 8 percent to 10 percent increase in net sales for the year, helped by new products and store openings.

It stood by its forecast for earnings per share to be "comfortably in a range" of $1.45 to $1.55, though it said it could be at the lower end of the range if same-store sales in Japan decline by a single-digit percentage.

"It's clear that strength in the U.S. and some improvement in Japan are the key elements" for where in the range the company's earnings end up, James Fernandez, chief financial officer, said in a conference call for analysts.

Tiffany shares were up 39 cents at $30.16 on Friday on the New York Stock Exchange.