RAPAPORT... Luxury jeweler, Tiffany & Co., announced its renewed push into the watch market on December 2, 2007, by teaming up with The Swatch Group to develop, produce, and distribute watches under the Tiffany brand.
In terms of the agreement, Swatch will incorporate a new watch-making company based in Switzerland, using the Tiffany trademark. Tiffany will have one director's seat among the five created for the new company, with representatives on marketing and product design committees.
As a consequence of the strategic alliance with Swatch Group, Tiffany will discontinue certain existing watch collections. As a result, Tiffany expects to record, in its fourth quarter ending January 31, 2008, a pre-tax expense of approximately $20 million associated with its inventory of the watches to be discontinued.
No money was exchanged in the agreement, which the companies referred to as one of "shared resources."
“This alliance will place Tiffany & Co. within the distinguished collection of luxury watch brands manufactured and distributed by the Swatch Group," said Tiffany & Co. chairman and chief executive, Michael Kowalski.
Kowalski said the two companies had been in discussions regarding the collaboration for over a year, adding that "the Swatch Group is the best conceivable strategic partner for Tiffany’s long-planned re-entry into watch distribution."
"[Swatch] is the leader in the high-end watch business with unparalleled distribution capabilities and experience in the luxury segment of the watch business,” he said.
The new company will create a complete line of Tiffany & Co. watches in Switzerland, creating both new Tiffany-designed watches, as well as incorporating existing Tiffany designs. Distribution channels will be inclusive of Tiffany & Co. stores as well as Swatch Group affiliates, retail facilities, and third party distributors. The Swatch Group will also have the right to operate Tiffany & Co. branded watch stores outside the United States which will include a targeted inventory of other Tiffany jewelry.
"The two companies will collaborate on design, engineering, manufacturing, marketing, distribution and service," said Swatch Group CEO and president Nick Hayek Jr. "In consequence, we fully expect to see Tiffany & Co. strengthen its position among the best known and most respected watch brands worldwide.”
The companies agreed to a 20-year partnership in the venture, with the possibility of a 10-year extension if certain conditions are met.
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