Eileen Kinsella, Monday, May 11, 2015
Sotheby's reported first quarter results today—the first such report delivered by new CEO Tad Smith—and the news was good. Net income was $5.2 million or 7 cents a share, compared with a loss of $6.1 million, or nine cents a share last year. This includes charges association with the CEO transition, prior year shareholder activism, and restructuring (Sotheby's Adds Tad Smith As New CEO).
For the major auction houses, the first and third quarters are typically less robust, since there are no blockbuster sales, as there are in New York every May and November. Last week, Sotheby's kicked off the major spring auction season with a $368 million Impressionist and Modern evening sale, and this week, major contemporary sales are to come, starting with a highly-anticipated evening sale on May 12 (see Mysterious Asian Buyer Causes A Sensation at Sotheby's $368 Million Impressionist Sale and Is Christie's Abandoning The Impressionist and Modern Market?).
Operating income was reported as $22.2 million, which is a substantial $12.4 million, or 127 percent, increase over the same period in the previous year. Sotheby's attributed the gain to an eight percent increase in auction commission revenues, improved auction commission margins, and three percent growth in net auction sales. Further, "the improvement in auction commission margin is primarily due to the change in the buyer's premium rate structure" enacted on February 1 of this year and "a lower level of buyer's premium shared with consignors." Results were further enhanced by the growth of Sotheby's loan portfolio and "a lower level of professional fees."
In a conference call with investors and analysts this morning, Smith noted that he has been in the Sotheby's CEO role for just 41 days, and has spent time talking with Sotheby's staff, clients, and key business partners in cities around the world. "I am encouraged that my priorities have not been materially changed," Smith said.
Outlining the priorities of the company as he sees them, Smith said Sotheby's needs a vibrant and compelling growth strategy, to embrace technology more effectively, to attract and retain top talent, and "to build on the productive path that [CFO] Patrick McClymont and prior CEO Bill Ruprecht began over a year ago to allocate capital more effectively and maximize shareholder value sustainably over time."
Smith, who replaced Ruprecht, was appointed CEO on March 16. Ruprecht announced late last year he would step down, following a lengthy, often-bruising proxy battle with activist shareholder Dan Loeb, who eventually won three seats on the Sotheby's board, including one for himself (see Will Sotheby's Again Fall Victim to Corporate Hubris With Dan Loeb, Tad Smith Takeover).
Just a few weeks later, news that Christie's CEO Steven Murphy was also stepping down caused ripples throughout the auction world (see Why Was Christie's CEO Steven Murphy Fired?).
In a statement with this morning's pre-market opening earnings report, Smith said Sotheby's "delivered significant profit growth in the quarter as compared to last year through strong sales in Old Masters, Impressionist & Modern and Contemporary Art… We are off to a good start in 2015)."
Shares of Sotheby's were responding positively, trading up 20 cents to $44.20 per share on the New York Stock Exchange following the earnings release.