Sotheby’s released second quarter results on Tuesday, reporting that earnings fell 33 percent over the prior year.
In an earnings call with investors, CEO William Ruprecht said results “reflect the global economy, which we’re all experiencing.”
Sotheby’s $85.4 million income declined from $127.2 million in 2011. Revenues dropped 18 percent. Income for the first half of 2012 is down 42 percent compared with the first half of 2011.
Ruprecht noted that “this is a quarter with unfavorable top line comparisons.” The second quarter last year was the biggest in the company’s history, and that this quarter was the fifth highest on record. Nothing, noted Ruprecht, “to be embarrassed by.”
Still, the call focused on explanations for the slump. The decline was most acute in single-owner sales and Asian sales. Single-owner sales were down 67% in the second quarter and 55% in the first half, and the spring sales in Hong Kong this year brought about $130 million less than the comparable sales last year.
Christie’s, which is privately owned and thus not required to make its financial reports public, released its earnings earlier this month and reported a 13% increase in global sales for the first half of 2012. However, Christie’s also reported a decrease in Asian sales compared to the first half of last year. While the firm did not mention specific numbers, this year its Hong Kong sale grossed $160 million than last year’s.
High-value consignments are the auction industry’s cash cow, and the battle between Sotheby’s and Christie’s to secure these consignments often involves luring the selling party with a low auction commission. Sotheby’s stated that auction commissions for the three and six months ending June 30th declined from 16.4% to 15.3% and from 16.4% to 15.8%, respectively, due to these “competitive pressures.”
Other losses were incurred by settling the almost yearlong dispute with the company’s unionized art handlers, which cost Sotheby’s $4.1 million in the second quarter for severance packages offered to those workers.
Sotheby’s saw growth outside the auction room. In keeping with the trend to make a greater proportion of deals behind closed doors, the volume of private sales grew by 15% over the first half, which resulted in a 9% increase in commissions from private sales (Christie’s reported a 53% increase in revenue from private sales). Revenues from Sotheby’s art lending business are also up more than 44% in the quarter, “reflecting what may be a trend by the wealthy to turn to their art for liquidity,” said Ruprecht.
Ruprecht posited that that same trend may also turn up bigger and better consignments in the second half.