Sotheby’s reported third-quarter earnings this morning, for the three-month period ending September 30, that as CEO Tad Smith pointed out “were not expected to be good.”
The auction house reported a net loss of $54.5 million, or 99 cents per share, far wider than the year-ago loss of $17.9 million, or 26 cents per share. Though the third quarter is typically not a robust one for auctions—major sales, such as New York auctions take place in the second and fourth quarters—Smith said the “seasonally low level of sales” was further influenced by three additional factors.
These included: net auction sales and commission revenue were adversely impacted by a change in the timing of the summer contemporary art sales in London, which were held in the second quarter of 2016. The shift in timing accounted for $197 million, or 93 percent of the $211 million decline in net auction sales from 2015 to 2016.
Sotheby’s also reported a $15 million swing in inventory activities, driven by $9 million in net gains, mostly from the sale of a single painting in the year-ago period, as well as $6 million in net losses from sales in inventory and related write-downs in the current quarter.
Linus Cheung. Courtesy Sotheby’s.
Additionally, Sotheby’s recorded a $17.2 million pre-tax charge related to its $50 million acquisition of Art Agency Partners this past January. The charge is related to the “previously announced earn-out arrangements associated with the acquisition,” Sotheby’s said in a statement.
With the jury still out on whether the private advisory firm founded by former Christie’s contemporary head Amy Cappellazzo and private dealer Allan Schwartzman should have commanded such a lofty price, Sotheby’s CFO Mike Goss was upbeat about their track record so far. “Since integrating AAP into our existing business, we have seen marked improvements ranging from competitive successes and enhanced auction commission margins to improved focus on private sales and the creation of a formidable advisory business which has brought in incremental revenues each quarter,” said Goss.
Sotheby’s also announced today that Linus Wing Lam Cheung, the retired CEO of Hong Kong Telecom, and a major collector of Chinese art, was unanimously named to its board. In connection with that appointment, Sotheby’s has struck an agreement with Taikang, its largest shareholder, by which Taikang has agreed not to increase its ownership position beyond 15 percent for a period of three years.