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RAPAPORT... Sotheby's revenue rose 57.6 percent year on year to $107.86 million in the third quarter that ended on September 30. Operating expenses increased 33.7 percent to $142.23 million. The auction house recorded a net loss of $30.13 million compared with a loss of $32.57 million one year ago. Due to the seasonal nature of the art auction market, Sotheby's third-quarter financial results have historically reflected a loss. During the period, Sotheby's experienced a sizable revenue increase from private sale commissions, but this was partially offset by higher operating expenses, according to the firm.
For the first nine months of the year, Sotheby's reported a 7.8 percent year-on-year increase in revenue at $514.48 million; however, expenses have risen 12.7 percent to $436.84 million and profit slipped 7 percent to $39.25 million.
"Our third quarter results have improved since a year ago, with sizable revenue growth. Private sales, which continues to be an area of focus for Sotheby's, contributed more than a third of auction and related revenues in the third quarter -- a significant shift from just a short time ago," said Bill Ruprecht, Sotheby's CEO.
"We're very pleased to say the fourth quarter is off to a remarkable start," continued Ruprecht. "Our Hong Kong sales series brought a record $538 million last month, a 105 percent increase over the previous year and a clear validation of our strategic investments in this region of the world. Last week, our Impressionist and modern art sales in New York achieved $348 million, up 71 percent and the second-highest series total in this category in the company's history. We have an outstanding calendar of sales to finish the year, with a $60 million pink diamond being offered in Geneva and our contemporary art sales in New York with a pre-sale estimate of $368 million to $515 million, both this week; a $60 million to $80 million motor car auction in association with RM Auctions next week; the extremely rare colonial-era Bay Psalm Book, which we expect will sell for a record price during Thanksgiving week; and an amazing group of Norman Rockwell paintings in our American art sale and our highly anticipated Modern and contemporary art sale in Beijing, both in December," Ruprecht said.
Sotheby's board stated that a recent financial review of the firm included an in-depth examination of its strategy, business and cost structure. Patrick McClymont, Sotheby's chief financial officer, said, "We are committed to ensuring that our resources are appropriately allocated to the most attractive opportunities for value creation. To that end, we are taking a close look at both our current businesses and potential growth areas where we can leverage our expertise and brand. The goal of this review is not only to determine the right use of capital going forward, but also to identify new opportunities to drive value for shareholders.
"From a growth perspective, Sotheby's has continued to invest in those areas that best serve its clients, promote business expansion and enhance shareholder value. These investments include significant and well-received improvements to the company's digital offerings and the development of Sotheby's business in China and other emerging markets," continued McClymont.
Sotheby's expects direct costs as a percentage of net auction sales will decrease in 2014 and that material savings can be achieved in areas of discretionary spending. Specific results of this review will be announced in early 2014 alongside the results of the capital allocation and financial policies review, according to the company's filing.
Ruprecht stated, "Sotheby's core philosophy continues to deliver for our clients. Today's art collectors have a remarkable understanding not only of quality, but also of value. The key to our success for nearly 300 years has been matching our clients' discerning taste with the right combination of fresh, unique and exquisite artwork and responsible estimates. In addition to our expertise, our sustained commitment to clients is the key to best serving them, our business and our shareholders.
"Demand and prices continue to be strong and this is an exciting time at Sotheby's. The breadth and quality of our offerings as well as the results in our global salesrooms, private galleries, retail wine and diamond, and finance businesses are all encouraging. I continue to have great confidence in the art market and the future of Sotheby's," concluded Ruprecht.
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