More on Sotheby's

In my last posting I referenced a Bloomberg Business video where they discussed the 4th quarter 2015 loss as well as 1st quarter 2016 YTD sales being 33% off the same mark from 2015.

The NY Times also reported on the some of the Sotheby's declining financial performance. According to the article, Sotheby's market capitalization is down 44% over the past 12 months. Many believe the next few quarters will remain challenging for the auction house.

The NY Times reports

On Friday, one day after the announced departures of two of its top dealmakers, Sotheby’s reported a loss of $11.2 million for the fourth quarter, confirming a bumpy road ahead in a period when the art market may be softening.

“Sotheby’s has a lot of work to do,” said David Schick, an analyst who follows Sotheby’s, given that “the revenue cycle is compressing, or the pendulum is swinging away.”

The financial results were not unexpected; last month, Sotheby’s estimated a net loss of $10 million to $19 million for the quarter — compared with a profit of $74 million the year before — partly because of a $37 million pretax charge associated with about 80 buyouts late last year.

But the loss caps a tumultuous year in which Sotheby’s put $515 million on the line to guarantee the collection of its former chairman, A. Alfred Taubman, acquired an outside art advisory business for as much as $85 million to help lift profits and has seen its stock decrease 44 percent over the last 12 months.

“We will likely have one or more difficult quarters as we ride through the current cycle,” Tad Smith, the president and chief executive of Sotheby’s, said Friday morning in a conference call with analysts and investors to report the latest earnings. But, he added, “We are confident in our future and managing the business through uncertainty with a clear eye on creating value now for shareholders and clients.”

Meanwhile, Sotheby’s has weathered the loss of several of its leading specialists. On Thursday, it confirmed the departure of Alex Rotter, the co-head of contemporary art worldwide, who is leaving at the end of this month. David Norman, the vice chairman of Sotheby’s Americas and the co-chairman of Worldwide Impressionist and Modern Art, is leaving after 31 years but will stay at least through the auctions in May.

Melanie Clore, Sotheby’s co-chairman of Impressionist and Modern art and chairman of its business in Europe, is leaving this month after 35 years at the house.

Speaking of what he called these “dislocations,” Mr. Smith said: “We didn’t want them, of course, but they are what we predicted, and we are going to get through them very well. We have the best team, period.” He added that there were a “large number of inbound résumés as well.”

Many people in the art world attribute these departures in large part to Sotheby’s acquisition of Art Agency, Partners, a boutique art advisory business run partly by a former executive at its archrival, Christie’s.

Sotheby’s paid $50 million — with an additional $35 million conditioned on performance — for the firm, which will lead a new fine-art division within the auction house, focused mainly on 20th- and 21st-century art.

This means that the existing longtime specialists at Sotheby’s will have to report to the new group, which includes Amy Cappellazzo, the former chairwoman of Christie’s postwar and contemporary-art development; Allan Schwartzman, a longtime art adviser; and Adam Chinn, a co-founder of the investment bank Centerview Partners and a former partner at the law firm Wachtell, Lipton, Rosen & Katz.

By acquiring the group, Sotheby’s hopes to increase profits, build private sales and expand its client base.

Marc Porter, a 25-year auction veteran from Christie’s whom Sotheby’s hired in December, will become a third chairman of the new fine-art division, leading global business development.

Full-year adjusted net income at Sotheby’s for 2015 was $143.1 million, compared with $142 million in 2014.

The auction house announced its earnings at a time when the art market has been bracing for a contraction. Its recent London sales of $307 million were down 40 percent compared with last year’s record totals.

“The market is a little tighter on consignments this year,” Mr. Smith said. “We’re in a subdued market.”

Source: The NY Times