A hefty one-off charge following a legal battle with Swatch took the shine off fourth-quarter results for Tiffany & Co, despite the US jeweller reporting sparkling global sales for the critical holiday season.

The company reported a net loss of $104 million, or 81 cents a share, for the fourth quarter compared with a net profit of $179.6 million, or $1.40 a share, for the same period a year earlier, following a $473 million net pre-tax charge related to the Swatch case.

However, even without the charge, adjusted earnings still fell short of Wall Street forecasts. Profit excluding costs in the three-month period ended January 31st was $1.47 a share, compared to the $1.52 a share predicted by analysts.

In December, a Dutch court ruled that Tiffany owed Swatch $450 million in damages after the termination of a watchmaking collaboration between the two luxury brands.

The New York-based jeweller also warned that it expected capital expenditure costs to rise 22 per cent later this year, to $270 million, as it overhauls its IT systems.

As a result, Tiffany provided a conservative profit forecast of between $4.05 and $4.15 a share for the next fiscal year. Wall Street analysts had projected $4.28 a share. Tiffany shares fell almost 4 per cent yesterday during premarket trading but by mid-morning had recovered, up 1.6 per cent.

“This muted outlook will continue to weigh on the Tiffany stock performance, especially given expectations were high after they did so well as to raise guidance earlier this year,” said Brian Yarbrough, analyst at Edward Jones. “Investors will undoubtedly be disappointed.”

However, there were brighter spots for the world’s second-largest jeweller by sales. Tiffany’s operating profits were up 6 per cent, with global sales rising 5 per cent from $1.24 billion to $1.3 billion, outperforming rivals in the sector at a bitterly competitive time of year. – Copyright The Financial Times Limited 2014