By  on September 29, 2005

NEW YORK — It seems Guess Inc. has kissed and made up with Callanen International.

The Los Angeles-based apparel and accessories brand said Wednesday it has signed a new 10-year licensing agreement for Guess watches worldwide with the Norwalk, Conn.-based unit of Timex Corp.

WWD reported Aug. 26 that Guess was leaving Callanen, after the company had manufactured and distributed its watches since 1984, to work with Richardson, Tex.-based Fossil Inc. The deal reportedly included a target of $125 million in annual wholesale volume and the creation of a separate firm within Fossil for the Guess business.

In response, on Aug. 31, Callanen filed a suit against Fossil, alleging it violated antitrust laws, created unfair state competition and interfered with Callanen's contractual relationship in regard to the proposed license deal with Guess.

On Sept. 20, Guess and Fossil said they had ended discussions regarding their long-term licensing agreement. Guess and Fossil said the decision had little to do with the lawsuit.

"The Guess business is still underpenetrated in many parts of the world," Carlos Alberini, president of Guess, said at the time. "That was one of the big reasons we initiated talks with Fossil. It's a big company with great global outreach. We saw a lot of positives in the relationship, but we spent a lot of time going through the negotiations process and we got to a point where we couldn't agree."

Guess' contract for watches with Callanen was set to expire on Dec. 31, but is now set to continue through Dec. 31, 2016. Under the new deal, Callanen will operate the Guess watch business through a new subsidiary.

"We're going to split off the Guess portion of the business and form a separate subsidiary in order to grow the business internationally," said Cindy Livingston, Callanen's president and chief executive officer. "We're going to begin to concentrate on the same markets as Guess Inc., which has experienced tremendous growth internationally, to marry the focus on expansion in the same countries. Last year, Guess' European business, for example, was up well over 50 percent."

Minimum royalties for the new license are based on wholesale sales of $1.45 billion for the initial 10-year term.Guess watches rank among the top-performing brands for Callanen, which also manufactures and distributes watches for Nautica, Marc Ecko, Country Club and Versace, the latter of which also has its own subsidiary under the name Vertime SA. Last year, according to industry sources, Guess sold between 4 million and 5 million timepieces and pulled in about $160 million at wholesale.

"This was a longer negotiation than I would have liked it to be," said Livingston. "But everybody in the end realized that we've been together for a long time and that we have very intertwined business goals that will be beneficial for the future."

Representatives for Callanen said the pending lawsuit has now been voluntarily dismissed.

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