Left to right: Bill Ruprecht, president and CEO of Sotheby’s; Steven Murphy, CEO of Christie’s
It was more than a little astonishing to see the Washington Post trumpeting the current “boom” at the “major auction houses” in an Aug.10 art-market report—Is Collecting Art the New Gold?
Three days before the publication of that bullish article by freelancer Kevin Nance, Sotheby’s had already reported bearish results for the first half of 2012: Its $74.8-million first-half net income declined 42% from the same period in 2011; total revenues of $408.9 million were down by 16%.
In his second-quarter conference call with securities analysts last Tuesday, Bill Ruprecht, Sotheby’s president and CEO, stated:
Our operating results reflect some tremendous successes [most notably the world-auction-record $119.92 million paid for Munch‘s “The Scream”], but also reflect the challenging global economy, a tough comparison to the best quarter in Sotheby’s history a year ago, and a competitive climate for high-end consignments.
Speaking of that “competitive climate,” archrival Christie’s had reported on July 17 that its sale total (including auction and private) for the first half of 2012 was $3.5 billion, up 11% over the same period last year. By contrast, Sotheby’s sales for first-half 2012 totaled $2.99 billion, down 12.7%.
Christie’s CEO Steven Murphy attributed his firm’s sales increase to “growing worldwide demand for art, the quality and curation of important consignments and our consistency in
offering the best service and broadest choice to our clients.”
What we don’t know is whether Christie’s was also Number One in net income, or whether its greater sales volume was achieved at the expense of profitability (as might happen, for example, if its commissions were slashed to attract consignments). Unlike the publicly traded Sotheby’s, Christie’s, as a private company, does not divulge net income.
Sotheby’s reported that its first-half results were “negatively impacted” by $4.1 million in voluntary severance buy-outs—part of the settlement of the auction house’s long-running labor dispute (scroll down) with its New York art handlers.
Also impacting the expense side was the $2-million increase in rent expense for Sotheby’s in Hong Kong, where the much vaunted “growth market” has (at least temporarily) stalled. Sotheby’s opened in May some 15,000 square feet of newly built exhibition space, at a time when “our Asian business has slowed” (as Ruprecht himself has acknowledged).
Normally adept at putting a positive spin on almost anything, Ruprecht found small comfort in the current situation, while professing optimism for the future. In his remarks at the May 8, 2012 annual shareholder meeting, Ruprecht
had asserted that “2012 is taking form as another vibrant year for the
Company.”
But last week, he was less buoyant. In light of current economic challenges, one growth area, he said, may be “a trend by the wealthy to turn to their art for liquidity, having exhausted other resources over the last four years….As we monitor developments in the broader world around us—China, Eurozone sovereign risks and the so-called U.S. fiscal cliff—it may well be that many are thinking of selling, in addition to borrowing, having seen their margin of liquidity eroded after four years of volatility.”
This is a very different tune from the one Ruprecht sang to securities analysts just a year ago, when Sotheby’s had the higher sales total of the Big Two auction houses and he was touting art for investment, not divestment.
In other words, of the Three D’s that drive auction consignments—death, divorce, debt—the last may now be first. “This isn’t something we’ve seen for some time,” Ruprecht conceded in response to one analyst’s question.
I think that any auctioneer would greatly prefer the demand-driven supply of a robust economy to the desperation-driven consignments that come out of the woodwork during hard times.