Sothebys Releases 3rd Quarter and YTD Results

The difference a day can make showed up earlier this week when comparing the poor results of the Christie's Impressionist and Modern Sale to the Sotheby's sale held a day later.  The difference a year can make can be staggering as well.  Third quarter results for 2009 at Sotheby's are rather poor. But when compared with the first 9 months of 2008, the differences are significant to say the least.  Hopefully the 4th quarter sales will minimize the red ink and start the process of a turnaround. Sotheby's has come a long way in reducing expenses and should be commended for those efforts. That being noted, the revenue hits have been substantial and have far outpaced any gains from the reduction of expenses. The press release explains some of the differences and rationale for the drastic sales decline, but the bottom line remains with an operating loss of over $80 million for the first 3 quarters of 2009. The Sotheby's press release covers much of the 3rd quarter activity, and there are positive signs when compared to the 3rd quarter of 2008, but when you compare the YTD figures through September of 2008 and 2009 the difference puts into perspective how poor the year has been for the auction house.

Some comparisons of the first 9 months of 2009 and 2008.

Total Revenues first 9 months 2008:  $525.39 million
Total Revenues first 9 months 2009:  $266.67 million

Total Expenses first 9 months 2008: $450.28 million
Total Expenses first 9 months 2009: $312.46 million

Net Income/Loss first 9 months 2008: $35.76 million
Net Income/Loss first 9 months 2009: ($80.11) million


From the Sotheby's Press Release (interesting that it opens with the positive results of the November Impressionist and Modern sale which is in the 4th quarter)

SOTHEBY’S ANNOUNCES 2009 THIRD QUARTER AND FIRST NINE MONTHS RESULTS

• November Impressionist and Modern Art Evening Sale Brings $181.8 million, Exceeding the Pre-Sale High Estimate of $163.6 million

• Third Quarter and First Nine Months Expenses Reduced Dramatically

• 49% Improvement in Third Quarter Auction Commission Margin

November 5, 2009, New York -- Sotheby’s (NYSE: BID) today announced results for the third quarter and nine months ended September 30, 2009.

For the quarter ended September 30, 2009, Sotheby’s reported revenues of $44.9 million, a $31.0 million, or 41%, decrease from the prior period. This decrease is primarily due to an 80% decline in net auction sales attributable to the movement of the summer London Contemporary Art sales from the third quarter of 2008 to the second quarter of 2009 (net sales of $208 million in the third quarter of 2008), the absence of the prior year’s Damien Hirst single-owner sale in London (net sales of $176 million in the third quarter of 2008) as well as the impact of the downturn in the global economy which continued to negatively impact sales across most collecting categories. The lower level of third quarter revenues is partially offset by a 750 basis point, or 49%, improvement in auction commission margin, from 15.2% in the third quarter of 2008 to 22.7% in the current period, as a result of management’s revenue enhancement strategies and a change in sales mix. Also positively impacting revenues is a $45.5 million reduction in principal activities losses over the period due to the significant level of auction guarantee losses in 2008 that did not recur in the current quarter. The Company continues to significantly limit its use of auction guarantees.

Operating loss for the third quarter of 2009 is ($38.3) million, a $19.1 million, or 33%, improvement when compared to the prior year, primarily due to a $50.1 million, or 38%, reduction in expenses, driven by the Company’s cost reduction initiatives and a lower level of net auction sales during the period. Also contributing to the operating loss improvement is the previously mentioned reduction in principal activities losses.

Net loss for the third quarter of 2009 is ($57.8) million, or ($0.89) per share, compared to ($47.0) million, or ($0.73) per share, for the prior period. This decrease is largely due to the aforementioned decrease in operating revenues, as well as a higher income tax provision in the current period resulting in expense of $10.8 million in the third quarter of 2009 compared to a benefit of $21.2 million in the prior year.

To read the full Sotheby's press release, click HERE.