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Auction Houses Post Robust Annual Results

Record auction prices and a surge in sale volume fueled a substantial increase in Sotheby’s fourth-quarter and full-year results. Christie’s International also announced a healthy increase in annual sales for 2004. On March 17, Sotheby’s said fourth-quarter net income was $36.2 million, or 58 cents a share—up from $20.2 million, or 29 cents a share,

NEW YORK—Record auction prices and a surge in sale volume fueled a substantial increase in Sotheby’s fourth-quarter and full-year results. Christie’s International also announced a healthy increase in annual sales for 2004.

On March 17, Sotheby’s said fourth-quarter net income was $36.2 million, or 58 cents a share—up from $20.2 million, or 29 cents a share, reported in the prior year. Auction sales were up sharply, to $1.15 billion, a 45 percent increase from the year-ago quarter at $792.9 million.

Sotheby’s attributes the improvement to a number of auction categories, including its fall Impressionist and modern auctions in New York, noting a 59 percent jump in sales to $232 million; and to its fall contemporary New York sales that posted a 23 percent increase to $121.1 million, as well as increases in American paintings sales and record-breaking Hong Kong sales in October.

Sotheby’s president and CEO Bill Ruprecht notes improving margins and calls 2004 “a remarkable year for Sotheby’s.” He adds, “We are delighted with these results. The 45 percent increase in sales for the fourth quarter translated to a doubling of net income, dramatically reflecting the operating leverage in the business.”

Full-year results were also higher across the board. The 2004 auction sales totaled $2.69 billion, compared with $1.69 billion in 2003, an increase of 59 percent, Sotheby’s reports.

Auction revenues rose 43 percent, to $443.1 million in 2004. Sotheby’s notes, however, that the increase was “partially offset by lower auction commission margins” on many of the “high-end works of art” that accounted for a sizable part of the overall increase.

In effect, stiff competition between the auction houses for the right to sell the best material means that sellers have considerable negotiating room for what commission rate they will pay the auctioneer (see ANL, 1/18/05). Sotheby’s says commission margins on such works “are traditionally lower due to the competition for such objects.

A number of key consignments and “a strong art market resulted in broad-based strength across a number of categories and geographic locations,” explains Ruprecht. Adding that 2005 sales have been strong to date, he points to a 37 percent increase in February’s Impressionist and modern sales in London, for a total of $103.8 million.

The contemporary art sales also fared well, totaling $42 million, an increase of 19 percent from the prior winter, with the evening sale achieving the highest total ever for a European contemporary sale at Sotheby’s.

Ruprecht says the auction house is further encouraged by the level of consignments for its upcoming spring auction season.

At Christie’s, Similar Annual Totals

Meanwhile Christie’s reports auction sales of $2.31 billion, slipping behind Sotheby’s overall total but well above its year-ago posting of $1.8 billion. (Both auctioneers posted nearly identical annual auction totals for 2003.) In addition to auction revenues, Christie’s posted private treaty sales of $151 million, similar in U.S. dollar terms to the year-ago total. Christie’s says the private sales were highlighted by its negotiation of the sale of Madonna and Child, by Sienese painter Duccio (di Buoninsegna), to the Metropolitan Museum of Art, New York. The price reportedly was more than $45 million (see ANL, 11/23/04).

In noting its past year’s strengths, Christie’s points to a “dramatic increase” in sales of Chinese paintings, which rose more than threefold, and Chinese works of art, which roughly doubled. Christie’s International CEO Edward Dolman describes 2004 as an “extremely strong year . . . with significant sales growth driven principally by our sales in Asia, and by new clients collecting and investing in all categories, including Impressionist and modern art, and postwar and contemporary,” among other genres.

As a privately held company, Christie’s is not obligated to report detailed quarterly financial results.

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