Sotheby’s Stock Is Up on Q2 Numbers, But No Can Agree on Why or What It Means

Sotheby's. ()

Sotheby’s. Courtesy Getty Images

It’s that time again! It’s earnings calls for the second quarter of 2016! (Please refrain from shooting flaming arrows through your neighbor’s open window and taking all the Quaaludes you’ve been saving since 1983.)

Since there’s basically one major publicly traded art entity—Sotheby’s—their earnings reports are kinda the closest thing to a barometer of the state of the auction market we can get our grubby pleb hands on. Often, they are a hint as to collectors’ sentiments at the moment, and right now there’s also the matter of Sotheby’s increasingly relevant financial arm and their recent, surprising $50 million acquisition of Amy Cappellazzo’s Art Agency, Partners—which are things people like to check in on.

Problem is no one can agree on what the takeaway was from Q2. (Might this be a clue that the art auction market—and hey, maybe the whole practice of self-reporting corporate earnings, which are kinda, you know, the stuff we all depend on to retire, ever—is a bit too opaque? Surely not.)

Bloomberg News says “second-quarter profit rose 31 percent driven by a sharp decline in expenses,” while The Art Newspaper leads with “CEO Tad Smith described a drop of 31 percent in overall sales volume and described an art market facing many difficulties.” Yes, they can both be true, sure, but which is more important? TAN goes on to call the second quarter earnings “better than expected,” but “inflated,” noting that Hong Kong sales were the only ones up year-over-year at this halfway point. Bloomberg—again with a cheerier tone—said the recent news that Taikang Life, a Chinese life insurer, could seek a board seat at the auction house (they own a 14 percent stake in the firm) was lifting stock prices and that “improved commission margins and a jump in Asian art sales fueled higher earnings at the auction house,” in the second quarter. Again, diverging but not conflicting narratives.

Art Market Monitor—a highly respected industry blog—focused on Sotheby’s online sales in its write-up, saying “online sales will have to grow farther and faster than [they did in the first half of 2016] to amount to a meaningful portion of Sotheby’s sale.” At the moment, online sales are 3.7 percent of total auction sales at Sotheby’s, though AMM notes that CEO Tad Smith has plans to invest in a “broader web video portal,” which could help boost that line of business.

And while the house is undoubtedly still in recovery mode after taking a loss on a big estate last year and the major (and ongoing) expenditure of buying AAP, we do know that Sotheby’s stock is up: it’s $37.88 per share as of this afternoon, after opening at $36.57. It was trading at $31.87 last Wednesday and $38.72 last year at this time, according to the poor man’s Bloomberg terminal: Google Finance.

So if we were forced to diagnose Sotheby’s financial status at the moment in six words, we’d say: “maybe stemmed bleeding; for how long?” But no one is asking us to.

Here’s the official press release if you want to try and parse it for yourself.

Sotheby’s Stock Is Up on Q2 Numbers, But No Can Agree on Why or What It Means