Tiffany, the upmarket jeweller, has defied tough market conditions by increasing its profits guidance for the first quarter and raising its dividend by 13 per cent.

The New York retailer said it will earn more than the 39 cents per share compared to the first quarter of 2007 after a “promising start to the year.” It also increased its quarterly dividend by 2 cents, or 13 per cent, to 17 cents.

Michael Kowalski, chairman and chief executive at Tiffany, said: “We will be reporting Tiffany’s first quarter results in two weeks.

"However, I’m pleased to report that we’ve had a promising start to the year. While we remain cautious about US economic conditions, net earnings in the first quarter will surpass our previous expectation. We will provide full details when we report our results on 30 May.”

Wall Street is nervous that, as the US flirts with 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. In January, Tiffany had lowered its profit forecast for the year following poorer than expected Christmas sales.

Tiffany shares rose $ 2.4, or 5.31 per cent, to $48.28 in morning trading.

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