Enjoy unlimited access: just £1 for 12 weeks

Subscribe now

The company put the decline down largely to exceptionally strong Impressionist and Contemporary sales in London in the first quarter of 2011.

Commission revenues for the period have improved as overall lot values have fallen - the graduated buyer's premium yields a higher margin per lot as the average lot price falls and there is a lower incidence of sharing commissions with vendors under such circumstances.

The focus of the company's efforts, however, remain in growth markets such as China and the Far East, and also on developing private treaty sales, the two most fought-over areas of business at the top of the auction world at the moment.

"Sotheby's current core strategic initiatives are focused on extending the breadth and depth of its relationships with major clients, developing a presence in China and other emerging markets, and enhancing its ability to conduct private sales," the company's annual report for 2011, just released to investors, confirms.

Private sale revenues were up $7m (85%) in the first quarter "primarily due to increased sales of high value property", said a spokesman.

Increased operating expenses of 5% in growth markets, including Sotheby's new Hong Kong gallery, contributed to the increased net loss of $10.7m for the period compared to a net profit of $2.4m for the first three months of 2011.

"As the excellent results of our May auctions make abundantly clear, the first quarter results are in no way reflective of a slowdown in demand for works of art around the world," said chief executive Bill Ruprecht. "Private sales will continue to be an area of strategic focus, as will the web and our presence in high growth global markets where we are already seeing meaningful results."

Sales Initiatives

Private sale commission revenues totalled $67.8m for Sotheby's in 2011, a 53% increase on 2010. The company have introduced new private sales initiatives over the past two years, including private sale exhibitions and, in 2011, they completed the construction of a dedicated private sale exhibition gallery, the S|2 Gallery, at their York Avenue headquarters in New York.

The growing importance of the company's Hong Kong operation is illustrated in Sotheby's annual report. It states that auction and related revenues from Hong Kong have almost trebled their contribution to the company's global totals since 2007, rising from a 6.5% share at $59.5m to an 18.8% share at $156.4m in 2011.

The report also makes it clear that the company's new Hong Kong gallery will allow them to increase the number of sales beyond their April and October series.