NEW YORK, N.Y. - Tiffany & Co.'s net income rose 2 per cent in the second quarter as revenue improved, but the performance missed Wall Street's expectations and the jewelry company cut its full-year guidance.

Tiffany caters to wealthy shoppers, but even those customers are keeping a close eye on their spending thanks in part to difficult economic conditions and volatility in Europe.

Tiffany, known for its blue boxes, earned $91.8 million, or 72 cents per share, for the period ended July 31. That compares with $90 million, or 69 cents per share, a year earlier.

Analysts expected earnings of 74 cents per share.

Revenue for the New York company rose 2 per cent to $886.6 million from $872.7 million. Wall Street forecast $891.1 million.

Chairman and CEO Michael J. Kowalski said in a statement that Tiffany's sales growth has been hurt by tough economic conditions and a difficult comparison with last year. The retailer is also continuing to deal with high product-related costs, but said that those costs have moderated a bit.

Sales in the Americas and Europe both edged down 1 per cent. Japan's sales increased 11 per cent, while sales in the Asia-Pacific region rose 1 per cent. Other sales climbed 12 per cent as Tiffany converted five stores in the United Arab Emirates to company-run retail stores.

Revenue at stores open at least a year dipped 1 per cent on a constant currency basis. This figure is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.

Tiffany said that it now expects 2012 earnings of $3.55 to $3.70 per share, down from $3.70 to $3.80 per share. Analysts predict $3.65 per share. It also trimmed its revenue forecast. The retailer now foresees revenue rising 6 per cent to 7 per cent for the year. Its prior guidance was for a 7 per cent to 8 per cent increase.

The company's stock gained $3.50, or 6 per cent, to $62 before the market open on Monday.

Tiffany said that it still expects earnings will decline in the third quarter and increase in the fourth quarter.