Swatch and Tiffany became embroiled in a legal battle in 2011 after the biggest maker of Swiss timepieces alleged the US jeweller blocked development of their partnership.
Tiffany said it honoured 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.
Last month, Tiffany posted third-quarter profit that topped analysts’ estimates and boosted its annual earnings forecast, helped in part by higher prices and falling precious metal costs. The $449m award doesn’t affect the company’s prospects, according to two analysts.
Tiffany “has the means to pay the total award with cash on hand, and the announcement eliminates a long-term overhang on the stock,” Ike Boruchow, an analyst with Sterne Agee & Leach, wrote in a note to clients yesterday. The New York-based analyst said “we would be buyers on any weakness in the shares.”
Tiffany is reviewing options with its legal counsel, the US company said in a statement. Beatrice Howald, a spokeswoman for Swatch, said she couldn’t comment on whether Tiffany can still appeal the decision. The payment is due immediately and interest dating back to Jun 2012 will be added to that, Ms Howald said.
Tiffany will take a charge of $295m to $305m 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.
“We were shocked and extremely disappointed by the decision of the arbitral panel,” said Michael Kowalski, Tiffany’s chief executive, adding the company has sufficient financial resources to pay the damages and it won’t affect its ability to execute its business plans.