Aug. 28 (Bloomberg) -- Tiffany & Co., the world's second- largest luxury-jewelry retailer, posted profit and sales gains that exceeded analysts' estimates, helped by strength in Europe, and forecast higher annual earnings.

Tiffany rose 10 percent in New York trading.

Net income increased to $80.8 million, or 63 cents a share, in the second quarter from $40.5 million, or 29 cents, a year earlier, when it had a charge of $23.6 million for the sale of its Little Switzerland chain, New York-based Tiffany said today in a statement. Eleven analysts surveyed by Bloomberg estimated average profit of 55 cents.

Total sales were ``strong'' in Europe and Asia-Pacific, where they jumped 35 percent and 17 percent, respectively. Revenue declined 4 percent at its U.S. stores open at least a year. Overall, luxury spending is withstanding the consumer spending slowdown, analyst David Schick said.

``Tiffany did a lot better than investors feared,'' Schick, an analyst with Stifel Nicolaus & Co., said in a telephone interview. ``Luxury isn't getting a ton better, but it is hanging in there. People are going to remain concerned about what happens next, given the state of the global economy and the global equity markets.''

Schick, based in Baltimore, recommends investors hold the shares.

Revenue for the three months through July 31 climbed 11 percent to $732.4 million, Tiffany said. Eight analysts projected quarterly sales of $729.4 million.

Shares Advance

Full-year profit will be $2.82 to $2.92, higher than its May 30 projection of $2.80 to $2.90 a share, Tiffany said. Sixteen analysts surveyed by Bloomberg predicted average full- year profit of $2.83. Eleven estimated sales of $3.25 billion.

Tiffany advanced $4.10 to $43.71 at 9:37 a.m. in New York Stock Exchange composite trading. Through yesterday, the shares fell 14 percent this year.

``In a really tough economic environment, the company continuously manages to beat expectations,'' Stacey Widlitz, an analyst with Pali Capital Inc. in New York, said in a Bloomberg Radio interview. ``Tiffany has become more of a global brand and its strength in Europe and Asia is really offsetting the U.S. weakness.'',

Widlitz recommends buying the shares.

Tiffany has accelerated its international expansion, planning to increase worldwide locations by 13 percent through early 2009. It had 196 stores and boutiques, including 72 in the U.S., 95 in Asia Pacific and 19 in Europe, as of July 31.

Cie. Financiere Richemont AG, based in Geneva, is the world's largest luxury-jewelry seller.

To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net

Last Updated: August 28, 2008 09:45 EDT