Sotheby's posts gain in latest quarter amid softening art market

NEW YORK • Sotheby's latest earnings report amounts to a microcosm of the art market.

Over the last three months, the auction house increased its net income to US$89 million (S$120 million), compared with US$68 million for the same period a year earlier, evidence that collectors remain willing to pay high prices for top artworks.

Still, given the company's substantial US$26 million loss in the first quarter, Sotheby's net income for the half-year ending June 30 reached only US$63 million, compared with roughly US$73 million for that period a year earlier, largely because of a decline in consignments. With uncertainty pervading the art market, collectors are less likely to put their property up at auction and are instead choosing to sell privately, if at all.

Overall, to date, sales volume is down by about 30 per cent, counting London sales last month, and Sotheby's is preparing for results to remain disappointing before they become better.

"Collectors are still buying quality works of art in well-curated sales," Mr Tad Smith, Sotheby's president and chief executive, said on Monday. "On the other hand, consignors who have the luxury of discretion are showing a bit of reluctance to sell their work at this time."

Because of these factors, he added: "We expect the third quarter to be quite weak, but the fourth quarter to be much better."

Mr David Schick, the lead luxury analyst at Consumer Edge Research, who follows Sotheby's, said the latest results were 30 per cent above expectations. "We are more positive" on Sotheby's ability "to manage through top-line headwinds", he said.

Despite a softening art market, Sotheby's has still been able to attract "record prices", Mr Smith said, when it can obtain prime inventory.

At its June impressionist evening sale in London, for example, the auction house brought in US$151.9 million (over the total high estimate of US$149 million) and set an auction high for a cubist work, with Picasso's 1909 painting Femme Assise, which sold for US$63.6 million, the highest price for any artwork sold at auction in London since 2010.

Although inventory has declined slightly in China, Mr Smith said that "there were clearly buyers" there.

Taikang Life Insurance, a Chinese company, last month bought a 13.5 per cent stake in Sotheby's, becoming the largest shareholder of the New York-based auction company.

"What do we think about how long the art market will be in the doldrums?" Mr Smith said. "It's hard to see it going much longer than 18 to 24 months."


A version of this article appeared in the print edition of The Straits Times on August 10, 2016, with the headline 'Sotheby's posts gain in latest quarter amid softening art market'. Print Edition | Subscribe