Tiffany ordered to pay Swatch damages
Tiffany & Co said a Dutch arbitration court ruled that it must pay Swatch Group 402 million Swiss francs (HK$3.47 billion) in damages over their failed joint venture to produce and market watches, and the New York-based jeweller slashed its profit outlook for the year.
Tiffany & Co said a Dutch arbitration court ruled that it must pay Swatch Group 402 million Swiss francs (HK$3.47 billion) in damages over their failed joint venture to produce and market watches, and the New York-based jeweller slashed its profit outlook for the year.
The arrangement, intended to last for 20 years and give Tiffany a much bigger place in the luxury watch market, never turned into big business for either company, and the deal ended in acrimony in 2011.
The companies sued one another in arbitration court in the Netherlands, where their Tiffany Watch joint venture was domiciled. The case went to arbitration last year.
Michael Kowalski, the chief executive of the luxury retailer, said in a statement that he was "shocked and extremely disappointed" with the court ruling, issued on December 20, and that the company was reviewing its options.
In their lawsuits, Swatch Group had faulted Tiffany for "systematic efforts to block and delay development of the business", while Tiffany had said that Swatch did not honour the terms of the joint agreement, including the provision of adequate distribution.
Kowalski said Tiffany had the resources to pay the full amount of damages. Tiffany said it would fund the award from immediately available cash on hand and funds from existing debt facilities, and it did not expect the ruling to impact its short- or long-term business plans.
For Tiffany, the dissolution of the deal with Swatch was a huge setback in its efforts to once again be a big player in the world of luxury watches.
The firm only gets about 1 per cent of sales from watches now, compared to about 9 per cent in the late 1980s. That shrank as the firm decided to focus more on its engagement jewellery business.
Kowalski said in a statement that Tiffany is moving forward with its plans to design, produce, market and distribute its own Tiffany & Co brand watches.
Tiffany said it would record a fourth-quarter charge of US$295 million to US$305 million as a result of the ruling. It lowered its full-year earnings outlook range to US$2.30 a share to US$2.35 a share from a previous estimate of US$3.65 a share to US$3.75 a share.
