Sotheby’s reports third quarter losses of $27.8 million

Sotheby’s reports third quarter losses of $27.8 million
Courtesy Sotheby’s.

In a conference call to investors and journalists on 1 November, Tad Smith, President and CEO of Sotheby’s, announced that the auction house reported a $27.8 million loss for the third quarter of 2018.

The third quarter, which ended on 30 September, traditionally brings in less when compared to quarters two and four, which are the bulkier periods for Sotheby’s offering larger ticket items in sales. Sotheby’s posted a net revenue of $22.9 million for the quarter.

This results in $0.55 per share ($0.41 per share after adjustments) meaning shares have declined by 18 percent since the start of the year. Additionally, Sotheby’s stock has decreased 18 percent, as well, in the last year.

In 2017, Sotheby’s reported losses of only $23.5 million and share losses of $0.45 in the third quarter. Mike Goss, Executive Vice President and CFO for Sotheby’s, cited two reasons for this year’s downturn when compared to the previous year.

In the conference call, Goss stated:

‘last year’s third quarter included a significant benefit for the reversal of a tax reserve that favorably impacted last year’s per share calculations by $0.14. And secondly, because of [Sotheby’s] aggressive share repurchase program, this year’s third quarter loss is spread over 50.9 million shares versus the 52.5 million shares we had last year. Put another way, if we had 50.9 million shares outstanding last year, our third quarter 2017 loss per share would have been a little over $0.01 higher.’

Despite seemingly less than stellar numbers for the quarter, the first nine months of 2018 saw an increase in consolidated sales of 20 percent from 2017 with a total of $4.04 billion. Private sales for the period were also up by 49 percent resulting in $675.4 million.

Smith then recapped the highlights that occurred during July, August, and September. Asian buying was up 12 percent in value overall and Hong Kong sales totaled $466.1 million. Additionally, Sotheby’s Contemporary Art Day sale saw a rare ‘white glove’ sale – when a sale has a 100 percent sell-through rate. This was not the only ‘white glove’ sale for the quarter. 975 lots from Pierre Bergé, a single collector, were sold entirely during a Paris auction bringing in $31.3 million – three times what the sale was expected to do.

Prepared remarks by Smith were rounded out with the auction house’s expectations and forecast for 2019 before taking questions from interested parties. Smith stated that Sotheby’s expects ‘for market conditions in 2019 to be a bit more subdued than what we experienced at the end of 2017 and into early 2018.’ This is due to the uncertainties stemming from ‘political noise’ in the US and abroad and rising interest rates, globally. However, the outlook for 2019 will be clearer after November sales are concluded.

For a full transcript of the conference call, click here.