Could Marc Porter be the turnaround artist that Sotheby’s urgently needs? If so, it may not be soon enough: “Because of a non-compete clause,” writes Kelly Crow for the Wall Street Journal, Porter won’t assume his new post until 2017.
Porter’s unexpected defection from Christie’s, where he has been chairman since 2009, was reported today by Marion Maneker of Art Market Monitor. But his title and responsibilities at Sotheby’s have not yet been publicly delineated.
That Tad Smith, Sotheby’s auction-neophyte CEO, could use more help at the top seems clear. His first nine months in the position previously occupied by William Ruprecht, who left after a losing struggle with activist investor Dan Loeb, have proven to be anything but “good for shareholders” (Smith’s repeatedly intoned mantra).
Today marked a milestone in BID’s skid. (“BID” is the stock symbol for Sotheby’s on the NY Stock Exchange.) Sotheby’s shares today nosedived below their previous 52-week low of 27.57.
Here’s the tale of the tape at today’s close:
My request for more specific details about late-breaking developments—the buyouts and the Porter hire—received a terse “no comment” today from Sotheby’s.
In other breaking Sotheby’s news, the NY Times‘ Robin Pogrebin reported that the firm’s recent buyout offer “achieved the company’s required cost savings and means that the auction house will not have to resort to layoffs.” The company’s spokesperson declined to answer my questions about the number of buyouts or the resultant cost savings.
To my ears, Smith has been tone-deaf when it comes to articulating Sotheby’s appropriate mission and vision: The emphasis should be placed squarely on service to clients, not satisfying shareholders. The former is a prerequisite for the latter.
Smith seems overly focused on superficial form (the appearance of the place and strategies for enhancing “the brand”), instead of substance. Sotheby’s specialist team includes veterans whose art-market knowledge is matched by depth of scholarship. Given Smith’s explicit acknowledgement that he is seeking to empower his company’s “less-tenured staff,” the loss of a significant number of veterans to the buyout seems a foregone (and problematic) conclusion.
While the returns aren’t entirely in yet, the over-touted and under-performing Taubman sales appear to have enhanced neither the house’s reputation nor its profits.
I think that Ruprecht was right when he emphasized (until pressured by Loeb) that the high-end, not the middle-market, was where Sotheby’s could most effectively deploy its focus and energies. “Auction commission margins” (calculated by dividing commission revenue by hammer price) are, by definition, higher in the middle-to-low price range, because the percentage charged on the hammer price is higher for lower-priced goods. But at the low end of the market, the profits per lot are counted in thousands, not millions. Porter, an accomplished seducer of high-end clients, is expected to be a rainmaker for Sotheby’s at the high end, where it most matters.
Under Marc’s leadership, Christie’s arrangements with third-party guarantors (as explored in my Q&A with him) and with other outside-party risk-sharers have been even more convoluted and opaque than at Sotheby’s.
According to Crow’s WSJ report, Porter now says that “he expects to focus on expanding [Sotheby’s] private sales, an option for sellers who want to discreetly unload pieces or avoid the risk that comes in a public auction.” But I’m guessing that the responsibilities of this savvy power player could be broader.
The company’s pressing imperative to cut costs is related, in part, to the huge pricetag (and resulting impact on profits) associated with severances and hires under the new regime. The cost for the importing Porter could further erode profits in the short term, while perhaps enhancing the bottom line in the long term.
These staff upheavals may ultimately have the desired effect—giving new energy to a company that seemed stalled near the end of the Ruprecht years. But the turnaround had better happen before the tanking stock price falls off the charts:
