Sotheby has reported its financial results for the first quarter ended 31 March 2016, citing a $25.9 million (£17.9m) net loss compared to last year.
For the three months ended 31 March 2016, Sotheby’s reported adjusted diluted loss per share of $0.35 on an adjusted net loss of $22.3 million (£15.4). In the same period in 2015, Sotheby’s reported adjusted diluted earnings per share of $0.11 on adjusted net income of $7.4 million (£5.1m).
On an unadjusted GAAP basis, Sotheby’s reported a net loss of $25.9 million (£17.9m), or $0.41 per diluted share, for the first quarter of 2016 as compared to net income of $5.2 million (£3.6m), or $0.07 per diluted share, in the same period last year.
The comparison to the first quarter results of 2015 is significantly impacted by a 35% decrease in net auction sales, which is the primary factor in a 33% decrease in auction commission revenues in the current period. In the first quarter of 2015, Sotheby’s reported unusually strong sales, attributable to record level various-owner sales of Impressionist and Contemporary Art in London, the single-owner Bear Witness Contemporary Art sale in London, and Asian Art sales in New York, which led to an atypically profitable first quarter for the seasonality of Sotheby’s business.
“As we exited 2015, it was clear that the significant market growth experienced in 2014 and the first part of 2015 had slowed somewhat, and the impact can be felt in our results for the first quarter,” comments Sothebys president and chief executive officer Tad Smith. “Nevertheless, we have experienced a number of high points so far in the second quarter, including a 17% sales increase in our April Hong Kong series. The most significant indicators on the current state of the market will come in the next two weeks of auctions in New York and Geneva. We are cautiously optimistic about these sales.”
The report comments that the worldwide art auction market has two principal selling seasons, which occur in the second and fourth quarters of the year. Second and fourth quarter net auction sales have historically represented approximately 80% of total net auction sales for the year. Accordingly, Sotheby’s financial results are seasonal, with peak revenues and operating income occurring in those quarters. Consequently, first and third quarter results have historically reflected lower revenues when compared to the second and fourth quarters and, typically, net losses due to the fixed nature of many of Sotheby’s operating expenses. Management believes that investors should focus on results for the six and twelve month periods, which better reflect the business cycle of the art auction market.