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    Sotheby’s Earnings Show Mixed Picture

    On Feb. 29, Sotheby’s posted results for 2011, indicating that the house had one of its best years to date in terms of auction and private sales.

    NEW YORK—On Feb. 29, Sotheby’s posted results for 2011, indicating that the house had one of its best years to date in terms of auction and private sales. However, investors and analysts focused on the fact that fourth-quarter revenue—typically one of the strongest because of the major New York fall auctions—had suffered a drop from year-ago levels and missed analyst estimates.

    The auction house reported $71.5 million in net income for the fourth quarter, down from $96.2 million in the comparable quarter for 2010. On a per-share basis, Sotheby’s reported net income of $1.05, falling below the consensus analyst estimate of $1.25 a share.

    In a conference call following the release of the earnings report, CEO Bill Ruprecht said the decline was “largely attributable to a decline in auction and related revenues,” which were down $35.6 million, or 11 percent, to $274.9 million. By comparison, the auction and related revenue in 2010 was $310.5 million.

    On the other hand, noted Ruprecht, for the full-year 2011, “Sotheby’s generated the best financial results in its 268-year history, apart from its record year in 2007.” The house reported a 7 percent, or $57.5 million, year-over-year increase in revenue, for a total of $791.7 million, as compared with $731 million in 2010. However, he conceded that the growth in annual revenue was “offset by a higher level of operating expenses due in part to increased staff levels” and their compensation costs; as well as the cost of investments purposed for growing its business in China and enhancing its information technology and online offerings.

    Ruprecht said the auction house saw consolidated sales in Asia reach $1 billion, and that the house will continue to expand its business in China and other fast-growing markets. A spokeswoman said details of the planned expansion in Asia would be released later this month.

    Ruprecht also noted that private sales, “an increasingly important part of Sotheby’s business,” hit a record $814.6 million, up 65 percent from the year-ago level.

    As ARTnewsletter was published, shares were trading at $35.36, down about 10 percent.

    Analyst Rommel Dionisio, of Wedbush Securities, released a report following Sotheby’s earnings in which he reiterated that the upcoming spring auctions could act as a near-term catalyst for the stock. He maintained the 12-month price target of $46.

    Sotheby’s recently announced it had won two major consignments to be offered at its May auctions in New York: a version of Edvard Munch’s The Scream, that may fetch as much as $80 million; as well as Pop artist Roy Lichtenstein’s Sleeping Girl, which has a presale estimate of $30 million/40 million.