Did you get a little blue box under the Christmas tree this year? Plenty of people did. The luxury business is booming as Tiffany & Company (TIF) saw earnings rise 50% in the fiscal third quarter.Tiffany operates 283 upscale jewelry stores around the world as well as operates an Internet and catalogue business.Big Beat in the Fiscal Third QuarterOn Nov 26, Tiffany reported its fiscal third quarter results and blew by the Zacks Consensus Estimate for the fourth quarter in a row. Earnings were $0.73 compared to the Zacks Consensus of $0.58 for a 26% beat.Global sales rose 7% to $911 million with comparable store sales also rising 7% as all regions saw growth.In the Americas, its largest market, comparable store sales rose 1%, driven by sales in its flagship New York store. Asia-Pacific continues to be hot with comparable store sales rising 22%. Even Europe joined the party, with comparable store sales growing 2% led by sales in the United Kingdom.Gross margin rose 2.6 points to 57% from 54.4% in the year ago quarter due to reduced product cost pressures as well as price increases enacted earlier in the year. However, the company has been selling more higher-price products which have lower gross margins so that has been offsetting some of the decline in cost pressures.Full Year Guidance RaisedTiffany was bullish in November as it raised full year guidance to a range of $3.65-$3.75 from its prior guidance of $3.50 to $3.60.The analysts moved to raise fiscal 2013 estimates. The Zacks Consensus jumped to $3.80 from $3.62 in the last 30 days.They are also bullish on next year as the fiscal 2014 Zacks Consensus Estimate has risen to $4.27 from $4.09. That's earnings growth of 12.2%.But...the Swatch Arbitration Ruling Dampens the PartyOn Dec 23, Tiffany announced it was ordered by a Dutch arbitration panel to pay Swatch $449.5 million in damages over a contract dispute regarding Tiffany watches. The company said it was "shocked" by the decision and was reviewing its legal options.However, it will be recording a charge for the after-tax impact of the award in the fiscal fourth quarter, which will be approximately $295 to $305 million. As of Oct 31, it had $521 million cash on hand. Tiffany said it will be paying the amount from cash and funds available under its existing debt facilities.Due to the charge, it lowered its earnings forecast for the year to $2.30-$2.35 from its Nov 26 guidance of $3.65-$3.75. The Zacks Consensus Estimate, however, remains unchanged, due to the one-time nature of the charge.While the arbitration rule is a blow, it doesn't change the forward momentum of the company. The rich are spending again, especially on high priced luxury items like jewelry. Tiffany is perfectly positioned to cash in on the trend in 2014.Shares at All-Time HighTiffany shares have been on fire this year as sales have continued to rise. They hit an all-time high this year, yet valuations don't look too stretched. Tiffany has a forward P/E of 24 which is in line with its forward P/E since 1998.If you want to play the growth of the luxury sector worldwide, this Zacks Rank #1 (Strong Buy) is one company to keep on your short list.Want More of Our Best Recommendations? Zacks' Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Then each week he hand-selects the most compelling trades and serves them up to you in a new program called Zacks Confidential. Learn More>>Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.