Profits at upmarket jeweller Tiffany fell 16% in the quarter to 31 January, but it saw strong sales at its famous New York store and outside the US.
Tiffany said sales in its flagship store, featured in the film Breakfast at Tiffany's, rose 21% in 2007, thanks to purchases by foreign tourists.
But Tiffany said it lost $48m on loans to Canadian diamond mining company Tahera that will not be repaid.
Income after tax from November to January fell to $118.3m (£59.7m).
Sales growth was greater in Tiffany's international division than in its home market, the US, where the economy is slowing down.
In the US, sales were up 4%, but outside the country, sales were up 21% in the last three months of its financial year.
The luxury retailer is emphasising the importance of its international business to its future growth.
"Despite current uncertainties related to consumer confidence in the US, we will continue to take advantage of our strong balance sheet and infrastructure to pursue our planned expansion opportunies worldwide," Tiffany chairman and chief executive Michael J Kowalski said.
Tiffany intends to open up to 20 more stores in Europe and Asia in a bid to continue to boost sales.
In January this year, Tiffany issued a profit warning after a fall in sales over the Christmas holiday period. It said its high-end customers were taking a more "cautious attitude".
Tiffany's shares rose 10.5% to $42.65.
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