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Ahead of the bell: Tiffany's shares downgraded

NEW YORK (AP) -- Tiffany & Co. was stripped of its 'buy' rating by Canaccord Genuity, with growing signs that once unshakeable shoppers at high end stores are finally cutting back on spending.

The luxury sector had been one of the few bright spots in retail during the economic downturn, as the wealthy seemed bent on shopping even as housing values tanked and thousands lost jobs.

There are now some signs of weakness within the pillars of the luxury market, including Tiffany and Coach Inc., which saw its shares plunge Wednesday after falling short of profit and revenue forecasts for the second quarter.

Coach, the upscale handbag maker, said that the economy and heavy price-cutting by competitors took a toll during the most recent quarter.

That dragged down the stock price of other luxury retailers as well Wednesday.

Canaccord analyst Laura Champine said in a research note published Thursday that Tiffany's sales momentum "continues to decelerate against an uncertain macroeconomic backdrop."

And recent changes to tax laws, which focus on the wealthy, could pressure luxury spending even more.

Champine replaced her 'buy' rating, with a 'hold."

Tiffany in January reported flat comparable store sales during the critical November and December shopping period. While sales rose 4 percent globally, it was less than expected, and the company told investors that it anticipated earnings for the year to come in at the lower end of its prior forecast.

Its shares tumbled.

"We believe (Tiffany's) near-term visibility is clouded," Champine wrote. She pointed out that Tiffany's has fallen short on per-share earnings projections for four consecutive quarters.

Shares of Tiffany slipped 73 cents to $62 in premarket trading Thursday, close to the midpoint of its 52-week range of $49.72 and $74.20.