High-end jewelry retailer Tiffany & Co. (TIF) Tuesday said demand for diamonds drove a 6 percent increase in holiday sales, and it narrowed its full-year profit forecast.

Total sales rose to $712 million in November and December, while worldwide comparable-store sales rose 6 percent.

U.S. sales were up 8 percent to $386 million as customers spent more per transaction, but sales were down 1 percent at its New York flagship store, it said.

The retailer gave no reason for the sales decline at its flagship store, but analysts had listed Tiffany among the retailers most likely to be hurt by a three-day New York City transit strike that ended just before Christmas.

International sales fell 1 percent to $241 million, but were up 8 percent stripping out currency effects. Total retail sales were up 7 percent in Japan, its key foreign market.

Direct marketing sales rose 14 percent as Internet orders soared.

The retailer said it now expects full-year profit in the range of $1.60 to $1.62 per share, assuming no meaningful change in sales or margin trends in January. It had previously predicted earnings between $1.55 and $1.65 per share.

Analysts, on average, expected $1.64 per share, according to Reuters Estimates.

Tiffany also gave an initial forecast for the next fiscal year ending in January 2007, which calls for earnings per share in the range of $1.77 to $1.82, 10 percent sales growth and at least 12 percent growth in earnings before taxes.

Analysts, on average, expected $1.84 per share.