Sotheby’s CEO Tad Smith Warns of a ‘More Subdued’ Art Market in 2019
But he remained bullish on the company's prospects for the fourth quarter.
Sotheby’s announced today that it lost $27.8 million in the third quarter of this year, a 19 percent drop from the equivalent period a year ago. The dip was due in part to the fact that relatively few major sales are held during the quarter, which includes the summer months and ends on September 30. (The largest auctions take place in the second and fourth quarters of the year, with the biggest sales coming up in New York in November.)
The current third quarter loss is 55 cents per share, 10 cents more than the third-quarter loss in 2017. Sotheby’s brass attributed the drop to a dip in sales from inventory as well as a few technicalities, including a one-time tax benefit in 2017 that did not repeat this year and the effects of a share-repurchase plan that further concentrated the typical loss among a smaller number of shares.
Putting a positive spin on the proceedings, Sotheby’s CEO Tad Smith said that nine-month figures provided a better sense of the health of the business. Looking at the results over this time frame, consolidated sales (which includes aggregate auction sales, private sales, and sales from inventory) are up 20 percent to $4.04 billion compared to last year, he noted. Further, private sales are up 49 percent, to $675.4 million, for the first nine months of 2018.
Although Smith noted that mainland Chinese buying declined 14 percent during this period, sales were up 12 percent in Asia overall, and in Taiwan in particular. He trumpeted the robust Modern and contemporary evening sale in Hong Kong on September 30, which set a new record, $65.2 million, for a work by the late Chinese-French painter Zao Wou-Ki.
But while Smith was sanguine about the house’s upcoming November sales (“We are… cautiously optimistic that our spectacular sales planned for the balance of the year will overcome a bit of macroeconomic uncertainty to perform very well”), he was more measured about his outlook for 2019. He said he predicted market conditions would be “a bit more subdued than what we experienced at the end of 2017 and into early 2018.”
Asked to elaborate, he noted that at this time last year, wealthy Americans had just experienced a major tax cut and economic growth was robust. “It was a different macro and political environment that was extremely healthy and favorable,” he said. Heading into 2019, he noted, there is concern about slowing economic growth in China and the fact that even “gently” rising interest rates could put pressure on emerging markets.
“I wouldn’t say that we are necessarily turning bearish, far from it,” Smith said. “But at the beginning of 2018, wind was blowing firmly in the sail, and that wind has moderated a bit.”
Smith also raised the curtain on new initiatives in the works on the tech side at Sotheby’s. Next year, the house plans to have a “paperless auction room with resultant improvements in client service, speed, and cost reduction.” An online consignment tool announced in 2017 has already attracted more than $30 million worth of objects, he noted. In October alone, there were 7,500 submissions, up 20 percent over the previous month.
Next year, Sotheby’s also expects to launch a new mobile and online interface, called Appraise, that will “serve as a platform for consignors who want to transact quickly, easily and conveniently.” Perhaps more intriguingly, the auction house is internally testing a “recommendation engine,” like the one Spotify uses for music.
Smith also briefly touched on one of today’s hottest art-market trends: blockchain. He said it “poses opportunities for the art market” and that Sotheby’s is “taking the technology very seriously.”
In an effort to attract and retain talent, Smith noted that Sotheby’s has granted all eligible employees restricted stock units, eventually “making all of our colleagues owners of Sotheby’s.” The company has also launched another noteworthy perk for US staff: a new student loan repayment program in which Sotheby’s will offer monthly contributions to qualified employees.
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