Sotheby's Swing to a Loss

Posted by: Charles DuBow on May 09

Oh, oh, looks like people aren’t buying art the way they used to. At least not through Sotheby’s (BID). The storied London-based auction house posted a loss for the first quarter this morning, based largely on a dip in single owner sales and lower commissions.

According to AP, for the three months ended March 31, the company reported a loss of $12.4 million, or 19 cents per share, compared with a profit of $24.3 million, or 37 cents per share, in the year-ago period.

What is surprising about this is that the high-end luxury market, of which art is very much a big part, has held up surprisingly well. Those who drop millions on a Picasso or De Kooning typically tend not to be concerned about paying off their mortgages. So why the drop? As in years past, it is possible that many high-end sellers are holding on to their prize possessions waiting for the boom times again. But also, as with the real estate market, sellers—at least those who don’t need to sell—are also realizing that they have the whip hand now and can force auction houses to accept their pieces for less. And since times are tight, the auction houses don’t have much choice but to simply take the hit and also wait for the good times to start rolling again. (Of course, Sotheby’s, Christie’s and all the other auction houses also make plenty of money out of more regular, smaller sales and it is possible that there has been a fall off here as well.)

But now that we are heading into the spring selling season, traditionally one of the high points of the art and auction calendar, it will be interesting to see what happens. Without any blockbuster sales, the second quarter could be just as bleak at the first.