• by Sarah Mahoney  @mahoney_sarah, March 25, 2008

When the going gets tough for retailers, it turns out diamonds may still be a girl's best friend. Tiffany & Co. says its net sales for the fourth quarter gained 10% to $1.1 billion, and worldwide, comparable-store sales increased 7%. In the U.S., sales for the quarter gained 4%.

Some luxury-goods experts expect that jewelry sales for companies like Tiffany will continue to be relatively strong. "Unlike many luxury purchases, jewelry is seen as having an inherent value," says Pam Danziger, founder of Unity Marketing, a Stevens, Pa.-based market research company that tracks luxury spending.

"Something like a car or expensive electronics begin to lose value as soon as you buy it. And as much as luxury handbag marketers like to say their purses are collectors' items, they also go down in value. But with jewelry, there's a sense that it continues to be worth something, even when prices are going through the roof."

In fact, she says, soaring precious-metal prices may actually be spurring jewelry sales. "With rising prices, there is a certain incentive to buy today instead of waiting, as a hedge against inflation."

In the year ahead, Tiffany says it expects "robust growth in our non-U.S. markets other than Japan and are experiencing such performance in the quarter-to-date. We remain cautious about the U.S., although comparable store sales are currently increasing slightly. We still expect a slight decline in comparable U.S. store sales in the first half of the year."

Tiffany's net earnings fell 16% in the quarter to $118.3 million, however, as a result of certain charges related to its strategic alliance with The Swatch Group Ltd, and other one-time write-offs. "Despite current uncertainties related to consumer confidence in the U.S., we will continue to take advantage of our strong balance sheet and infrastructure to pursue our planned expansion opportunities worldwide."

Danziger, meanwhile, projects that affluent shoppers won't lose their taste for luxury jewelry and travel. Among the 32 million households she describes as affluent--in the top 25%, with earnings of $150,000 or more--"there's going to be a lot more resistance to things like designer handbags or jeans.

"These shoppers have been on an extended spending spree, and they have closets full of that stuff. And everybody knows that things don't make you happy--these are just desires, not needs. So marketers will have to work harder to make products irresistible."