ARTnewsletter Archive

Writedowns Weigh on Sotheby’s Third-Quarter Earnings

On Nov. 7, with the major fall auctions in full swing, Sotheby’s posted third-quarter earnings that showed a net loss of $29.7 million, wider than the $19.4 million net loss reported last year.

NEW YORK—On Nov. 7, with the major fall auctions in full swing, Sotheby’s posted third-quarter earnings that showed a net loss of $29.7 million, wider than the $19.4 million net loss reported last year. The house noted that the third quarter has typically been a loss period for the company due to the seasonal nature of the art market. Major auctions are held in the second and fourth quarters of each calendar year.

Sotheby’s said that auction and related revenues totaled $52.9 million, down $2.2 million, or 4.4 percent, from the year-ago period. According to Sotheby’s earnings report, the decline was largely due to an $8.1 million decline in net auction sales resulting from a $13.8 million decrease in single owner sales.

In mid-2006, Sotheby’s reached an agreement with Maastricht dealer Robert Noortman to acquire Noortman Master Paintings, a gallery specializing in Old Master, Impressionist and Post-Impressionist paintings. In the transaction, Sotheby’s took over all the assets of Noortman Master Paintings, consisting principally of art inventory, receivables and the gallery premises. In the latest quarter, Sotheby’s noted that results were “unfavorably impacted by $5.7 million of dealer segment inventory writedowns related to Noortman Master Paintings,” in addition to other events.

Wedbush Securities analyst Rommel Dionisio issued a report on Sotheby’s performance on Nov. 8, noting that third-quarter revenues had “[disappointed] on unusually weak dealer business.” Dionisio wrote, “the sharp Q3 decline in dealer revenue, along with a $6 million inventory writedown on this dealer business, certainly came as a negative surprise.”

On the other hand, Dionisio observed that major fall auctions are showing year-on-year improvement, “highlighting continued life in the global art market.” Dionisio maintained his “outperform” rating on the stock but lowered the price target on the shares to $46 from $48. As ARTnewsletter was published, shares of Sotheby’s stock were trading at approximately $33.

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