Louis Vuitton owner LVMH said Thursday it intends to file a lawsuit against Tiffany, accusing the luxury jeweler of "dishonesty" and mismanaging the coronavirus crisis.
The announcement comes a day after LVMH announced it would be scrapping its $16.2 billion acquisition of Tiffany, a deal that would have been the biggest ever in the luxury industry. Tiffany then sued LVMH in Delaware to enforce the agreement.
LVMH said it was "surprised" by Tiffany's "totally unfounded" lawsuit.
"LVMH will defend itself vigorously," the company said. "The long preparation of this assignment demonstrates the dishonesty of Tiffany in its relations with LVMH. This action is essentially based on the accusation by Tiffany that LVMH failed to take the reasonably necessary steps to obtain the various regulatory authorities' approvals in a timely way."
LVMH has argued it can't complete its acquisition of Tiffany after the French government requested a delay on closing the deal. It also said Tiffany didn't follow an ordinary course of business during the pandemic, for example by extending dividends to shareholders when it was losing money.
It also called Tiffany's recent financial results and 2020 outlook "very disappointing, and significantly inferior to those of comparable brands of the LVMH Group."
Tiffany's net sales for the quarter ended July 31 fell 29% from a year earlier. That was slightly better than when it reported a 45% drop during the quarter ended April 30, along with a $65 million loss.
A representative for Tiffany didn't immediately respond to CNBC's request for comment.
"Even prior to the pandemic, Tiffany's business trends had been volatile, but Covid-19 resulted in challenges that the company has never experienced before," Wells Fargo analyst Ike Boruchow said in a note to clients.
He said, however, investors appear to be keeping a "floor" on the stock in the near-term, betting that initiatives by Tiffany's management team to expand into new product categories and invest online will payoff, even as a standalone company. Tiffany is also still in the midst of remodeling its Fifth Avenue flagship location in New York.
And there's still the possibility that the deal from LVMH could be renegotiated at a lower price, or another conglomerate could come into the picture and submit a bid for Tiffany, Boruchow said.
Tiffany shares were up nearly 1% in premarket trading Thursday, having closed Wednesday down more than 6%. Shares are down about 14% this year, bringing its market value to $13.8 billion.
