Tiffany ordered to pay Swatch CHF402 million

Tiffany watches from the Cocktail series in 2007. A strategic alliance between Swatch and Tiffany to manufacture and sell Tiffany watches ended in a bitter lawsuit Keystone

Tiffany & Co, a New York-based jeweller, has been ordered by a Dutch arbitration court to pay Switzerland’s Swatch Group CHF402 million ($450 million) in damages over their failed joint venture to produce and market watches.

Swatch, the world’s largest watchmaker, and Tiffany had struck an agreement in 2007 to develop watches under the Tiffany brand together.

The arrangement, intended to last 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 Co joint venture was domiciled. The case went to arbitration in 2012.

Michael Kowalski, chief executive of the luxury retailer, said in a statement on Sunday that he was “shocked and extremely disappointed” with the court ruling and that the company was reviewing its options.

In their lawsuits, Swatch 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 agreement, including providing adequate distribution.

Profit drop

Kowalski said Tiffany had sufficient financial 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 that it didn’t expect the ruling to have an impact on its short- or long-term business plans.

Tiffany only gets about 1% of sales from watches now compared with about 9% in the late 1980s. That shrank as the company decided to focus more on its engagement jewellery business.

Kowalski added that Tiffany was moving forward with plans to design, produce, market and distribute its own Tiffany brand watches.

Following the ruling, Tiffany lowered its full-year earnings outlook range to $2.30-$2.35 a share from a previous estimate of $3.65-$3.75 a share.