Sotheby's 2nd Quarter and First Half Results

As noted in earlier posts on the AW Blog, Christie's was showing strong sales and for the first half of 2012.  We also know that Sotheby's was not expecting a strong second quarter, which happens to be a very important quarter which impacts the bottom line of the auction house.  Second quarter net income was $85.4 million, down a substantial 33% from the same quarter in 2011.  Additionally revenue were down18% and for the first half of the year net income was down 42% and total revenue was down 16% compared to the prior year.

The stock price did drop a few days ago upon the news of the financial returns, but it has been rebounding since the announcement.

Sotheby's reports

Sotheby’s reported second quarter 2012 net income of $85.4 million, a decrease of 33% from the prior year period, and total revenues of $303.9 million, down 18%, when compared to the prior year period.  For the six months ended June 30, 2012, the Company reported net income of $74.8 million, a decrease of 42%, and total revenues of $408.9 million, down 16%, when compared to the prior year period.  The lower levels of revenues and profitability in the current periods reflect a decrease in net auction sales when compared to the prior year periods and in particular, a 67% decline in single owner sales volume in the second quarter and a 55% decline in the first half.

The impact of the decline in total revenues is partially offset by reductions in total expenses of $13.6 million, or 8%, in the second quarter and $8.5 million, or 3%, in the first half.  First half 2012 results are negatively impacted by incremental expense relating to resolution of the labor dispute with New York unionized art handlers, the bulk of which is for severance benefits to be paid to certain union members in exchange for their voluntary termination of employment.  However, Sotheby’s management believes that future labor costs have been reset in an attractive and sustainable way.

“Our operating results reflect some tremendous successes, but also reflect the challenging global economy, a tough comparison to the best quarter in Sotheby’s history a year ago, and a competitive climate for high-end consignments,” said Bill Ruprecht, President and Chief Executive Officer. “Demand and prices remain strong, especially at the high end of the market, as reflected in our highest ever sale of Impressionist and Modern Art of  $373.3 million in May in New York.

“We’re pleased to report that our Financial Services business grew substantially in the first half of 2012 and private sales are an increasingly important contributor to our revenue stream.  We have seen a slowdown in the Asian market alongside the economy there, but it continues to be very profitable and a source of substantial opportunity for Sotheby’s.

“Art appears to remain an attractive asset for collectors and our consignment pipeline for the Autumn season is very active at the moment. We remain confident in the global art market and will, as always, seek opportunities to broaden and extend the breadth and depth of our relationships with our clients,” he added.