Sotheby’s Sees Art Market Bottom: Profit Declines 87%
Date: 9 Aug 2009 | | Views: 2690
Source: Bloomberg, by Philip Boroff
Sotheby’s Chief Financial Officer William Sheridan said art prices and sales have stabilized, after the New York-based auctioneer reported a worse-than- expected 87 percent drop in second-quarter earnings.
“Unless there’s some external event we’re not aware of, we believe the market has bottomed out,” Sheridan said in an interview last night.
Auction houses including Sotheby’s and Christie’s International abandoned the practice of guaranteeing minimum prices at the end of 2008. Sellers were reluctant to offer works at auctions when prices were falling. The average auction price of contemporary art dropped 76.2 percent since May 2008, London- based ArtTactic said in May.
Sell-through rates -- the percentage of lots sold at auction -- jumped to 81 percent in May from 64 percent in November at Sotheby’s New York evening Impressionist and modern art auctions, Chief Executive William Ruprecht said in a conference call.
Yesterday, Sotheby’s reported its first quarterly profit in a year. Net income fell to $12.2 million, or 18 cents a share, from $95.3 million, or $1.41 a year earlier, the company said in a statement. Analysts had estimated on average a profit of 29 cents, according to data compiled by Bloomberg. Sheridan said higher taxes contributed to the drop in net income.
Sotheby’s made $21.30 in commission revenue for every $100 in auction sales in the quarter, up 41 percent from $15.10 a year earlier, Sheridan said. The increase was due to fewer sales of high-priced lots. Commissions are on a sliding scale, with lots over $1 million garnering lower fees as a percentage than cheaper works.
To reduce costs, Sotheby’s has fired staff, cut pay and required unpaid furloughs. Excluding restructuring charges and a nonrecurring benefit recorded last year, the company reduced operating expenses by $73.5 million, or 39 percent.
The shares fell 73 cents to $14.99 yesterday in New York Stock Exchange trading before the results were released. They’re up 68 percent this year and 74 percent below their closing high of $57.64, on Oct. 10, 2007.
Auction-related revenue declined by more than half in the first six months, to $197 million.
“I don’t see it get any worse than those first-half volumes,” Ruprecht said. He remained equivocal about forecasts. In answer to an analyst who requested guidance on when the market would recover, Ruprecht said: “How many qualifiers do you want before I answer that question?”