Market News

Sotheby’s Posts $65.5 M. Profit for Fourth Quarter of 2016, Beating Expectations




This morning, Sotheby’s CEO Tad Smith addressed shareholders in its quarterly earnings call, the ceremony that over the past year has been somewhat dour as the auction house dealt with layoffs and weaker sales amid a contracting market.

But in the fourth quarter of 2016, Sotheby’s exceeded high expectations, turning a profit of $65.5 million after a spate of carefully calibrated November sales in New York. A year ago, the auction house posted an $11 million loss during a period when it was mired in voluntary buyouts and underperforming sales.

“We were cautiously optimistic in November, but as it turns out, the weight in that statement should have been on optimism,” Smith said during the call. “This quarter demonstrated that when the market stabilizes, let alone when it returns to its secular growth trajectory, our company is poised to capitalize on the upturn and do very well for our shareholders.”

Despite the gain, there was no way to spin the overall downward trend affecting the market. Sales have fallen 27 percent compared to this time last year, and revenues fell 16 percent from the last year.

The call touched upon successes such as Americana Week, which had its best performance in a decade, as well as relative disappointments—Masters Week, which took place in January and will be reflected in the next quarter’s sales, had sales markedly lower than the year prior.

And it addressed the increase in bidding from China. In 2016, Chinese bidders accounted for half of the year’s top sales, and bid during sales at various Sotheby’s sale rooms. Forty-eight percent of Chinese participation took place outside of the headquarters in Hong Kong. Last year, Taikang Life Insurance, whose biggest shareholder is the auction house China Guardian, acquired 13.5 percent of the company’s shares, making it the largest Sotheby’s shareholder.

Also up for discussion was the current political climate, as today’s earnings call is the first since the 2016 presidential election—the last call took place the day before. “In the U.S., we obviously have a new administration that is looking at tax reform and economic and regulatory policies that might affect the art market or Sotheby’s,” Smith said. He then went on to address the potential upside of unrest regarding Brexit, saying that “exchange rates present a favorable opportunity in our London salesroom for non-British buyers.” The sales in London begin next week.

As a publicly held company, Sotheby’s is mandated to inform shareholders of its profits or losses each quarter—unlike Christie’s, which is privately held and thus does not need to discuss its revenues. Sotheby’s sees this as an advantage.

“One of the things that you buy into with Sotheby’s is the revenue visibility,” Smith said during the call.

© 2019 ARTnews Media, LLC. All Rights Reserved. ARTnews® is registered in the U.S. Patent and Trademark Office.