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Tiffany Ordered to Pay Swatch $449 Million in Watch Case

Swatch Group AG won an arbitration award of 402 million francs ($449 million) from Tiffany & Co. (TIF), more than the New York-based jeweler earned last year, after the Swiss watchmaker claimed a breach of contract at a joint venture.

Tiffany said it will take a charge of $295 million to $305 million in the fourth quarter for the decision by an arbitration panel in the Netherlands. The charge may reduce earnings by as much as $2.35 a diluted share for the fiscal year ended Jan. 31, relative to the forecast of $3.65 to $3.75 a share given in November, Tiffany said in a statement.

Tiffany’s counterclaim was dismissed by the Netherlands Arbitration Institute, said Biel, Switzerland-based Swatch, the biggest maker of Swiss timepieces, in a separate e-mailed statement.

2011 became embroiled in a legal battle after the Swiss company alleged the U.S. jeweler blocked development of the business. Tiffany said it honored its obligations under the terms of the alliance the two companies had begun almost four years earlier, when they agreed to develop and sell watches under the Tiffany brand and share the profits. Swatch said in 2011 that the venture would shut down within two years.

Tiffany earned $416 million in net income in its last fiscal year, according to data compiled by Bloomberg. Swatch last year had said that it sought 3.8 billion francs in damages from New York-based Tiffany, while it later said Tiffany counter-claimed 541.9 million francs.

The Swiss maker of Omega watches in January announced the $1 billion purchase of the Harry Winston watch and jewelry unit, adding a luxury label to its portfolio. That purchase filled the gap in its portfolio left by the dissolution of the Tiffany collaboration, analysts said at the time.

Estimates from Retail Metrics LLC show U.S. luxury chains will post a 5 percent gain in fourth-quarter sales at stores open at least a year, smaller than last year’s 5.4 percent increase. The group monitored by Retail Metrics is made up of Tiffany, Coach Inc., Michael Kors Holdings Ltd., Williams-Sonoma Inc., Blue Nile Inc. and Zale Corp.

/ Source: bloomberg

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