Sotheby’s stock up as profit beats estimates
Net income, commissions, both improve
• Sotheby’s, the New York- based auctioneer of art and collectibles, reported a fourth-quarter profit as its deal-making strategy helped improve commission margins. Shares jumped as much as 15 per cent in New York.
Net income was US$ 65.5 million, or US$ 1.20 a share, compared with a l oss of US$ 11.2 million, or 17 cents, a year earlier, the company said in a statement Monday. On an adjusted basis, profit of US$ 1.35 a share beat the US$ 1.17 average estimate from five analysts in a Bloomberg survey. The stock has doubled in the past 12 months.
“Our fourth quarter 2016 results came in better than expected largely due to a number of strong fourthquarter sales,” chief executive officer Tad Smith said in a statement.
“These results reflect growing confidence in the market as collectors responded enthusiastically to the great collections and works we secured for sale.”
In November, Sotheby’s sold all 356 works of art and design from David Bowie’s collection, generating US$ 41.1 million in London. In New York, it had success with the collection of Steven and Ann Ames, led by a group of paintings by Gerhard Richter, which tallied US$131.3 million, surpassing the estimate and the guarantee offered by the auction house to win the works.
Consolidated sales were US$4.9 billion in 2016, down 27 per cent from 2015. By contrast, rival Christie’s sold US$5.4 billion of art and collectibles last year. This overall figure includes auction sales, inventory sales and private sales.
Sotheby’s auction sales for the full year were US$4.2 billion, down 29 per cent. Private sales fell 13 per cent in 2016 to US$ 583 million. Online buyers spent US$155 million, up about 20 per cent from the prior year.
Although sales were down, auction commission margins in fourth quarter increased to 18 per cent from 12.9 per cent in 2016. For the full year, margins were 17.1 per cent compared with 14.3 per cent in 2015.
Sotheby’s progress in improving auction commission margins isn’t “going to continue indefinitely into the future to the tune of 200 or 300 basis points,” said Michael Goss, the company’s chief financial officer. “As the market recovers at the higher end where buyer’s premiums are lower, that will work against us as well.”
Sotheby’s executives said they were optimistic about the art market going forward based on consignments and conversations with clients.
“We’re certainly feeling less headwind than we were at this time last year,” Goss said, adding that the first half of 2017 is expected to be on par with the previous year, and any rebound is likely to happen “later in the year.”