Sotheby’s Reports Income of $89 Million in Second Quarter but Warns of ‘Weak’ Times to Come

CEO Tad Smith stressed opportunities online and in Asia.

Flags fly outside Sotheby's December 5, 2005 in New York Photo by Michael Nagle/Getty Images.

Sotheby’s reported second-quarter net income of $88.6 million, compared to $73.1 million in the same quarter a year ago, for a 21 percent increase.

The softening art market presents a paradox, said CEO Tad Smith in a phone call with investors Monday morning: collectors are eagerly buying top-quality works, but consignors are reluctant to sell. That has resulted in sales volume dropping by some 30 percent from 2015, he said, but individual sales are doing well and setting new records.

Smith offered examples of recent London art sales, which scored high, selling upward of 85 percent of lots offered, and a record-setting jewelry sale in Geneva in May.

The house also stressed its opportunities and successes in Asia, where sales continue to climb. Hong Kong sales are up 22 percent over the prior year, Smith reported, and the number of Asian clients buying Western art at Sotheby’s increased by 12 percent in the first half of 2016.

Smith emphasized the house’s increasing focus on online sales, totaling some $90 million in the first half, up just over a quarter from the previous year. Moreover, the number of lots sold online has grown by more than half, he said.

As part of the call, Smith stressed recent hires, including Gagosian staffer Candy Coleman and Andy Warhol Museum director Eric Shiner, both of whom will work in private sales. Those sales return higher margins as they don’t require the production costs of major auctions.

However, the outlook isn’t so sunny for the months to come. Smith and chief financial officer Mike Goss warned that the increases seen in the second quarter would not be replicated in the third, but urged investors on the call to think in terms of half-years rather than quarters, due to the highly seasonal nature of the auction market.

“The third quarter is going to be very weak but you have to look by half,” Smith said. “That’s what we’re trying to get the Street to see,” he noted, referring to the financial services site, which recently gave the auction house a mixed “hold” rating.

Sotheby’s stock (BID) is down 3.25 percent over the last year, from $38.72 to $37.46 per share.

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