WSJ, August 5, 2009
By JOHN KELL
Profit at Sotheby's plunged 87% in the second quarter, as the art auction house's sales tumbled, but auction commission margins improved.
The New York-based company reported earnings of $12.2 million, or 18 cents a share, down from $95.3 million, or $1.41 a share. But it was the first quarterly profit for Sotheby's after three consecutive losses.
Auction houses have been struggling to secure enough top material to entice bidders, as the economic downturn forces them to rely heavily on individuals selling art for personal reasons.
Sotheby's latest quarter's results included a $4.8 million restructuring charge, while the year-earlier quarter's figures included an $18.4 million benefit related to the expiration of discount certificates the company issued in 2003 in connection with an antitrust settlement. Revenue fell 48% to $167.3 million, with auction sales declining 66%.
Auction-commission margins at Sotheby's rose to 21.3% from 15.1% a year earlier, helped by a change in the company's sales mix.
Sotheby's shares rose 4.9% to $15.72 each in after-hours trading, as revenue topped Wall Street's expectations. The stock has regained nearly three-quarters of its value this year, but it is still far below its all-time high of more than $58 in 2007. Analysts polled by Thomson Reuters expected per-share earnings of 28 cents on revenue of $153 million.
The company has seen its credit ratings downgraded to junk status amid concerns about near-term covenant violations and a decline in the world-wide art-auction market. In June, Sotheby's struck a deal that would lower the borrowing limit on its credit line by $100 million but raise the interest rate it pays on its borrowings. The company also said it is in discussions about a new credit line with an expiration date beyond September 2010 to replace its existing facility.
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