Art market news
Art market news
Art market news

Flagging market and ‘deeper’ dip in business cycle blamed for Sotheby’s grim fourth-quarter earnings

CEO Tad Smith addressed shareholder concerns over low sales and departures of key staff

by Dan Duray  |  26 February 2016
Flagging market and ‘deeper’ dip in business cycle blamed for Sotheby’s grim fourth-quarter earnings
Sotheby's takes a hit: CEO Tad Smith with Sylvester Stallone
Sotheby’s CEO Tad Smith painted a bleak picture for the company on its 2015 fourth quarter earnings call to shareholders early Friday, 26 February, pinning much of the responsibility on an art market he described as flagging. Sotheby’s shares opened today on the New York Stock Exchange at $24.81; last year’s share price for the same date was $42.95.

“The most recent sales of the company confirm that we have in recent months been experiencing a period of lower sales in the art market than in the 2013 and 2014 period,” Smith said.

“Total aggregate sales” for the quarter to date were $438m, 33% below where they were for the same period the year before. Sales on the collection of the company’s former owner, A. Alfred Taubman, continued to disappoint, bringing in $383m in 2015 against a guarantee of $515m, and dragging the margin on auction commissions down to 14.3% for 2015 compared to 14.7% in 2014. The total adjusted net income for 2015 was $143m, around what Sotheby’s had announced earlier and similar to the total in 2014.

News broke yesterday about two major departures from Sotheby’s: Alex Rotter, the global co-head of the contemporary art department, who had been with the company since 2000, and 31-year-veteran David Norman, the vice chairman of Sotheby’s Americas and co-chairman of Impressionist and Modern art worldwide. Though they were not named specifically, Smith was asked during the questions portion of the call whether the departures would affect business. Smith downplayed the extent to which it would and said that it was at least better to lose the two key sales staff “when there are less consignments out there”.

Smith said the company’s strategy moving forward would be to focus on the middle market (objects valued between $25,000 to $1m), and improve its contemporary business and private sales, as demonstrated by its $50m purchase of the advisory firm Art Agency Partners last month.

“Our company has a very bright future,” Smith said. “At the same time, we operate in a cyclical business. Some of the cycles are shallow and short, others might be a bit deeper and a bit more prolonged.”

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