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

Shares in Tiffany plunged by almost a sixth 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 them to reconsider their forecasts for this year's annual profits.

Michael Kowalski, chief executive, said: “We believe a recent pullback in U.S. 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, key aspirational shoppers will tighten their belts and opt to buy items from cheaper stores. Analysts have cited retailers such as Tiffany as particularly vulnerable.

Shares in the group are already down by more than a third since the summer when the US began to suffer from 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 expects earnings per share of between $2.25 and $2.28, compared with earlier forecasts of $2.25 to $2.30.

Both forecasts have excluded an exceptional gain from the sale of its Tokyo flagship store and the jeweller's recent deal with Swatch to make Tiffany watches.

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

During the two-month November and December period, Tiffany said that total sales in the US had increased 4 per cent to $449.1 million and admitted that those sales were derived from fewer customers. At the flagship store on Fifth Avenue, in New York, sales rose 10 percent, 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 non-US 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 is to 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.

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