Bloomberg News

Swatch Ends Alliance With Tiffany, Alleging Contract Breach

September 12, 2011

(Updates with Tiffany comment in third paragraph.)

Sept. 12 (Bloomberg) -- Swatch Group AG, the biggest maker of Swiss watches, is ending its alliance with Tiffany & Co., alleging the U.S. jeweler breached its contract by blocking development of the business.

Swatch will claim damages from Tiffany to compensate for “long-term future business,” the Biel, Switzerland-based watchmaker said in a statement today. The move followed Tiffany’s “systematic efforts” to delay growth of the watch brand, Swatch said.

Tiffany said in a statement that it “has honored its obligations under the agreement, and insisted that Swatch honor its own obligations, particularly its obligation to respect Tiffany’s rights regarding brand management and product design.”

The companies formed the alliance in 2008 to develop, make and sell watches under the Tiffany brand, agreeing to share the profits. Swatch said the venture will shut down within two years as it terminates contracts to cooperate with New York-based Tiffany.

The split “is a pity because Tiffany watches would have boosted sales in the area of jewelry watches,” a segment where Swatch is “weak,” Patrick Hasenboehler, an analyst at Bank Sarasin, wrote in a research note. The end of the alliance won’t have a major effect on forecasts in the short and medium term, he added.

Swatch closed little changed at 354 Swiss francs in Zurich trading. The stock has declined about 15 percent this year.

The agreement was set to last 20 years and could have been extended for an additional 10 years. The collaboration was run by Swatch Group Chairwoman Nayla Hayek.

The end of the agreement isn’t a surprise as neither side was “satisfied with the success of the contract and sales were behind expectations,” said Rene Weber, an analyst at Bank Vontobel in Zurich.

The agreement allowed Swatch to operate Tiffany watch stores in markets outside the U.S. and offer a selection of Tiffany jewelry.

--Editors: Thomas Mulier, David Risser

To contact the reporter on this story: Dermot Doherty in Geneva at ddoherty9@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


Steve Ballmer, Power Forward
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus