Jeweller Tiffany announced a rise in earnings this week but said its performance had been hit by high precious metal prices.

The company announced an 11 per cent rise in sales during the three months to the end of January, hitting $810.1 million compared to $731.6 million in same period a year earlier.

Despite this rise, Tiffany said its sales in Japan, a key market for consumer jewellery, had been disappointing.

"Sales in Japan have been clearly disappointing although it remains a highly profitable market," Michael Kowalski, chairman and chief operating officer, told Reuters.

He added: "We believe we have taken the critical step to begin turning things around in Japan."

The company has also been forced to absorb some of the impact from the rise in precious metal prices.

"Throughout 2004 inventory costs have been pressured by higher costs of precious metals and diamonds, much of which we have not yet passed through to consumers," chief financial officer James Fernandez explained.