In an earnings call earlier this morning, Sotheby’s reported a $57.3 million net income in the second quarter of 2018—a decrease of $19.6 million, or about 26 percent, in comparison to the same period in 2017, when the auction house announced that it had brought in $76.9 million.
It attributed the drop partially to a change in the auction calendar, with some Hong Kong sales taking place in the first quarter instead of the second, and to a decrease in its auction commission margin.
Consolidated sales rose 22 percent to $3.5 billion—some of the highest totals in the company’s history, according to a release. However, there was a decline in its auction commission margin, it said, because a competitive environment for high-value lots resulted in “a higher level of auction commissions shared with consignors in these situations.”
Mike Goss, Sotheby’s CFO, explained, “When looking at this year’s second quarter results, one needs to consider the shift in the timing of certain Hong Kong sales from the second quarter of 2017 to the first quarter in 2018.” A sum of $130 million was shifted in net auction sales from Q2 to Q1, as well as a total of $20 million in operating income. Pointing this out, Goss thus highlighted totals for the first half of 2017 versus the first half of 2018, which showed a decline from $65.6 million to $50.8 million, a slightly more modest drop in performance of 23 percent.
Sales in Asia remain strong, however, CEO Tad Smith said. Aggregate auction sales in the continent for the first half of 2018 totaled $488 million, signifying a 15 percent uptick in the new year. In the call, Smith said that the continent “continues to be a success story . . . In the first half of 2018, Asian clients account for 28 percent of our aggregate auction sales, and purchased 8 of the top 20 lots sold at Sotheby’s, year to date.” Twenty-eight percent of buyers at Sotheby’s Asia outpost were new.
The tone of the call was largely downcast, and Smith expressed disappointment about the earnings. “Overall,” he said, “these results were lower than we expected. At the same time, management and the board are excited as ever about the company’s prospects going forward.”
At around 11:30 a.m., a couple hours after the call, Sotheby’s shares were down more than 5 percent. This reported drop in earnings comes after the recent departures of Christy Maclear and Eric Shiner, who served as vice chairman of the firm Art Agency, Partners and senior vice president, respectively.