Fears that America’s credit crisis is spilling over to hit consumer spending were fuelled yesterday after Tiffany, the upmarket jeweller, gave warning that sales over the Christmas period had fallen.

Shares in Tiffany plunged by more than 10 per cent after it admitted that like-for-like sales during November and December had declined by 2 per cent. The group also conceded that the poor sales performance had forced it to reconsider its forecasts for this year’s annual profits.

Michael Kowalski, the chief executive, said: “We believe a recent pullback in US spending likely reflected a more cautious attitude among customers about the near-term direction of the economy and related factors.”

Wall Street is nervous that, as the US heads towards a recession, aspirational shoppers will tighten their belts and opt to buy items from cheaper stores. Analysts have cited retailers such as Tiffany as being particularly vulnerable.

Shares in the group are down by more than a third since the summer, when the US began to suffer the fall-out from the sub-prime mortgage crisis and tightening credit conditions.

Yesterday Tiffany lowered its profit forecast for the year and said that it expected earnings per share of between $2.25 and $2.28, compared with earlier forecasts of $2.25 to $2.30. Both forecasts excluded an exceptional gain from the sale of its Tokyo flagship store and the jeweller’s recent deal with Swatch to make Tiffany watches.

The group also reduced its full-year sales growth forecast to 14 per cent from 15 per cent.

During November and December, Tiffany said that total sales in the US had increased 4 per cent to $449.1 million (£229 million), but it admitted that those sales were derived from fewer customers.

At the flagship store on Fifth Avenue in New York, sales rose by 10 per cent, driven by the increasing number of tourists visiting the US, attracted by the weak dollar.

International like-for-like sales rose 5 per cent, while total nonUS sales rose 12 per cent to $334.8 million. Total sales for the November-December period rose 8 per cent to $867.3 million, helped by sales growth in silver and engagement jewellery.

Last month Tiffany and Swatch, the world’s biggest watchmaker, said that they were going into partnership. Swatch said that it would set up a company that will use Tiffany’s designs and branding to sell watches that will be manufactured and distributed through the global Swatch network.

The new company will be wholly owned by Swatch and based in its home country of Switzerland, while Tiffany will have one seat on the board and will receive an undisclosed share of the profits.

Swatch, which has signed a 20-year agreement with Tiffany, will also manufacture existing Tiffany designs, add new ones and open stores under the Tiffany name outside the United States.

Swatch had $4.4 billion of sales in 2006 compared with Tiffany’s $2.6 billion for the same period.

Analysts gave a warning to investors in December after the jeweller issued its third-quarter earnings. Even though sales for the period came in at the top end of Wall Street expectations, Tiffany had been forced to cut prices.

Goldman Sachs told its clients that the shares were likely to suffer because of weakening American demand and tough comparisons with the year before.

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