December 22, 2013 11:03 pm

Tiffany cuts forecasts after losing damages claim to Swatch

Tiffany & Co slashed its full-year expectations on Sunday after a Dutch court ruled that it must pay Swatch $449.5m in damages over a dispute regarding the termination of a collaboration between the companies.

Tiffany said that it would take a charge of about $295m to $305m in the fourth quarter tied to the after-tax impact of the payment. As a result, the US jeweller said it expects earnings per diluted share for the fiscal year ended January 31, 2014 to be reduced to $2.30 to $2.35 from the guidance issued in late November of $3.65 to $3.75.

The news comes about a month after the luxury group raised its full-year forecast for the second consecutive quarter after reporting earnings that beat analysts estimates amid growing Asia-Pacific spending on its trademark diamonds.

Tiffany said on Sunday that it would review its legal options tied to the case, which came before an arbitration panel in the Netherlands. Swatch said on Sunday that it had terminated a collaboration with Tiffany for breach of contracted and pressed claims for damages in 2011. The following year, Tiffany filed a counterclaim.

Tiffany said that it would review its legal options but had “sufficient financial resources” to pay Swatch the full amount ordered by the court.

“We were shocked and extremely disappointed with the decision of the majority of the arbitral panel,” Michael Kowalski, Tiffany’s chief executive, said in a statement.

“However, we do not believe that the award will impact our ability to realise our existing business plans in the short or long term, and we are extremely pleased to be moving forward with our plans to design, produce, market and distribute our own Tiffany & Co brand watches.”

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