High-end jewelry retailer Tiffany & Co Inc. (TIF) on Wednesday reported higher quarterly profit, but sales lacked sparkle, especially in Japan, and shares fell as much as 4 percent.

Analysts said sales growth at stores open more than a year, a key measure of retail health, was disappointing in the United States and Japan, Tiffany's biggest overseas market.

Tiffany said earnings rose to $23.8 million, or 16 cents a share, in the third quarter ended on October 31 from $17.4 million, or 12 cents a share, a year earlier. The results met the average forecast from analysts polled by Reuters Estimates.

But net sales, which jumped 8 percent to more than $500 million, fell short of Wall Street revenue expectations of $507.41 million.

Sales at stores open for more than a year climbed 7 percent in the United States, but were flat in Japan after rising in the second quarter for the first time in two years.

"The Street was hoping for positive comps in Japan, and also some investors were expecting same-store sales growth in the U.S. to be 10 percent or higher," said Fulcrum Global Partners analyst Stacey Widlitz.

Tiffany's sales in Japan had suffered due to deflation. The company's decision to raise prices on silver jewelry to protect its status as an upscale brand also hurt its performance there.

In the third-quarter, the company recorded an after-tax charge of $4.31 million, or 2 cents a share, from selling a glassware manufacturing facility and an equity interest in a specialty retailer.

Tiffany also reported a lower tax rate of 33 percent, down from 38.2 percent a year earlier.

For the full year, the company backed its forecast of earnings of $1.55 to $1.65 a share and sales growth of 8 percent to 10 percent.

Analysts on average forecast earnings of $1.63 a share on sales of $2.42 billion, according to Reuters Estimates.

Tiffany shares were down $1.17, or 2.8 percent, at $40.97 in New York Stock Exchange trade after falling as low as $40.45 earlier in the session.

The stock is up about 28 percent so far this year and trades at 25 times expected fiscal-year earnings. The broad Standard & Poor's 500 index has risen nearly 4 percent in 2005 and trades at 16.8 times expected earnings for the year.