Sotheby's New York headquarters
Sotheby’s latest results showed auction sales up 19% but net income down by 23%. Image courtesy of Sotheby’s.

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In particular, the year has been negatively impacted by the shortfalls on two guaranteed paintings which alone reduced the commission margin by 1.1% across the six month period. One was the lot that fetched the highest auction price ever in Sotheby’s history, Amedeo Modigliani’s Nu couché (sur le côté gauche) that sold for $139m in May 2018 against an estimate ‘in excess of $150m’.

The other was Buste de femme de profil (femme écrivant) by Pablo Picasso that was offered at a London auction in June. It was knocked down at £24m to a lone phone bidder against an unpublished estimate believed to be in excess of £30m.

Sotheby’s president and CEO Tad Smith said that “overall, the results were lower than we expected” but added that “Sotheby’s is on track to deliver another year of excellent growth in auction sales and even more impressive growth in private sales”.

Auction sales figures for the first half of the year to June 30 of $2.85billion (up 19%) from more than 23,000 lots are close to the highest the company’s history. Private sales in the same period were also up, spiking by 63% to reach $543m.

However, net income was down by 23% to $50.8m - reflecting the significant drop in auction commission margins that averaged out at 15%.

Lower margins

Smith said that this margin “came in below where we would have liked to see it” but conceded that “much of the [sales] growth in the quarter was attributable to a few large, competitive, fiduciary driven consignments that tend to carry lower margins”.

Buyer's premium receipts had also been “used to offset auction guarantee shortfalls and fees incurred in respect of risk-sharing arrangements”.

Smith added: “With respect to a couple of the season’s high value lots, there appeared to be a bit less bidding than a year ago.”

Amedeo Modigliani’s ‘Nu couché (sur le côté gauche)'

The top lot of the year so far at Sotheby’s, Amedeo Modigliani’s ‘Nu couché (sur le côté gauche)’ – sold for $139m in May 2018 against an estimate ‘in excess of $150m’.

Asia continues to be the primary driver of both new and established business.

Sales here enjoyed a 90% selling rate with totals up 15% to $488m while Asian buyers accounted for 28% of all auction sales, purchasing eight of the top 20 lots sold at Sotheby’s this year to date. The firm says an increasing number of Asian clients are buying Western art (up 28% year-on-year).

Sotheby’s Paris operation recorded its best first half results since the opening of the French art market in 2001 while online-only sales are up approximately 30%, totalling just over $100m.

chinese imperial vase sothebys

Sotheby’s Paris operation recorded its best first half results since the opening of the French art market in 2001. The top lot of the season was this imperial Qianlong (1736-1795) mark and period vase knocked down at €14.2m (£12.5m) in June.

The number of online-only sales staged this year is already equivalent to the whole of 2017, with as many as 40 additional sales planned for the balance of the year.

Any direct comparison between the second quarter of 2018 with the same period last year is difficult due to subtle changes in the calendar. Nudging elements of the spring Hong Kong sales back this year effectively shifted $130m in net auction sales and $20m in operating income from one accounting period to another.