Breakfast at Tiffany's is likely to be gruel for Michael Kowalski for the foreseeable future as the retailer's chairman and chief executive digests the effects of the economic downturn on expensive jewellery.

In a fresh sign that even the affluent are cutting back, Mr Kowalski slashed Tiffany & Co's full-year forecast yesterday and said that the company would be forced to cut staff and trim its 2009 store growth plans.

Tiffany, like other high-end retailers, until recently had appeared immune to the economic turbulence, but the tentacles of the crisis have now spread to wealthy consumers' confidence.

Tiffany said that sales had fallen by 5 per cent in its Manhattan flagship store on Fifth Avenue, which had been enjoying strong gains from tourist spending this year. “It is impossible to know when consumer confidence will be restored,” Mr Kowalski said.

For the current quarter, which includes the Christmas holidays, he expects worldwide sales to decline 13 per cent to 20 per cent. The company's strong international sales had typically helped to offset recent weakness in the US but yesterday it said that Europe and Asia were “challenging” markets. Based on fourth-quarter sales of $1.05 billion a year ago, Tiffany expects sales between $843 million (£551 million) and $917 million.

Tiffany did not specify how many jobs would be shed. The company temporarily suspended share buybacks to conserve cash.

Investors took fright at Tiffany's outlook, with shares down 36 cents to $20.47 in afternoon trading.

After completing an MBA at Harvard Business School, Mr Kowalski joined Avon Products in 1978, the year before it acquired Tiffany. In 1983 he was offered the position of director of financial planning in the Tiffany division. The following year Avon sold Tiffany, and Mr Kowalski stayed on to help with strategy and with the float of the company on the New York Stock Exchange in 1987. He became president in 1996, chief executive in 1999 and added chairman to his title in 2003.

Mr Kowalski is passionate about green issues and has spent ten years developing the company's environmental strategy. Five years ago Tiffany stopped selling coral after discovering that “there is no such thing as sustainable coral farming”.

The 56-year-old's interests include Russian history and literature and underwater exploration and marine archaeology. He is a director of The Bank of New York Mellon.