How much does lost time cost? To Swatch Group, it’s billions, while to Tiffany it’s hundreds of millions.
The Swiss watch company on Monday revealed the astronomical sums involved in its litigation with Tiffany & Co. over their now-terminated cooperation agreement, dropping a bombshell over the industry during the Baselworld watch and jewelry fair, which is in full swing.
Swatch said it had sued Tiffany in December for 3.8 billion Swiss francs, or $4.13 billion at current exchange, in lost profits. It was the first time the Swiss group had made the amount of its claim public. The sum is greater than Tiffany & Co.’s 2010 net sales of $3.09 billion.
Tiffany said Monday it has countersued its former partner, and is claiming 541.9 million Swiss francs, or $589.4 million, in damages.
“This counterclaim has no factual or legal basis and will be vigorously contested by Swatch Group,” Swatch stated.
In response, Tiffany & Co. filed an 8-K report with the Securities and Exchange Commission on Monday in which it said it disputes “both the merits of the Swatch parties’ claims and the calculation of the alleged damages.
“Management has not included any accrual in the consolidated financial statements for the year ended January 31, 2012 related to the arbitration as a result of its assessment that an award of damages to the Swatch parties in the arbitration is not probable,” Tiffany stated.
“If the Swatch parties’ claims were accepted on their merits, the damages award cannot be reasonably estimated at this time but could have a material adverse effect on [Tiffany & Co.’s] consolidated financial statements or liquidity.”
The arbitration hearing is expected in October, according to Tiffany.
The two parties had signed a 20-year cooperation agreement in December 2007, under which Swatch would design, manufacture and distribute Tiffany & Co. watches worldwide.
Swatch accuses Tiffany of “systematic efforts to block and delay the development of the business,” while Tiffany claims the watchmaker “failed to provide appropriate distribution for Tiffany branded watches in the luxury space,” and did not respect its obligations in terms of brand management and product design.
Swatch Group terminated the agreement in September 2011, as reported.
The case will be brought before the Netherlands Arbitration Institute (NAI). A spokeswoman for the NAI confirmed that proceedings normally take around nine months to be resolved from the date of filing, but could not reveal details about individual cases.
“The outcome of legal disputes is difficult to predict,” Zürcher Kantonalbank said in a research note Monday. “We do, however, assume that, if anything at all, the Swatch Group will receive something from Tiffany.”
According to Tiffany’s 10-K filing from March 2011, watches sold in its own stores accounted for about 1 percent of its net sales in 2010, which would amount to around $30 million. Additionally, Tiffany watches sold through Swatch Group’s distribution network represented less than 1 percent of Tiffany’s net sales, it said. This would mean total sales of Tiffany branded watches in 2010 brought in revenues somewhere between $30 million and $60 million.
In Basel, the space previously dedicated to Tiffany watches was occupied by the Tourbillon cafe, named after the multibrand stores Swatch Group operates for its higher-end offer, reflecting the growing emphasis the group is placing on its retail activities.
Shares in Swatch Group rose 0.41 percent Monday to 74.30 Swiss francs, or $81.02 at current exchange, while Tiffany & Co. shares closed up 0.54 percent to $69.14.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast