Tiffany to rebuild watch business once it resolves Swatch spat

NEW YORK (Reuters) - Tiffany & Co sees big potential in its watch business and plans to build it back up once its feud with one-time partner Swatch Group SA is settled, the U.S. jeweler said on Thursday.

The company only gets about 2 percent of sales from watches now, but Chief Executive Officer Michael Kowalski said at a conference that the percentage could be much more over time and even return to the 9 percent level of two decades ago.

"We are working very diligently to imagine what our watch business might look like once our disagreements with the Swatch Group are behind us," Kowalski said at a Goldman Sachs retail conference in New York.

In 2007, the company formed a joint venture with Swiss watchmaker Swatch to develop, produce and distribute Tiffany-branded timepieces. The arrangement, intended to last for 20 years, never turned into big business for either company, and the deal ended a year ago.

The companies have sued one another in arbitration court in the Netherlands, where their Tiffany Watch Co joint venture is domiciled. The case goes to arbitration this autumn.

Kowalski said that in the late 1980s, watches made up 8 percent to 9 percent of Tiffany's sales. That shrank as the company decided to focus more on its engagement jewelry business.

Watches will never be 50 percent of sales for Tiffany, but the business is "a great opportunity for us," Kowalski said.

Swatch Group, the world's largest watchmaker, faulted Tiffany for "systematic efforts to block and delay development of the business." Tiffany in turn has said that Swatch did not honor the terms of the agreement, including providing adequate distribution.

(Reporting by Phil Wahba in New York; Editing by Lisa Von Ahn)