Sotheby’s Reports Quarterly Profit After Cost Cuts (Update3) - Bloomberg.com

March 1 (Bloomberg) -- Sotheby’s reported its largest quarterly profit in 18 months as commissions increased and the New York-based auctioneer cut expenses.

Net income was $73.6 million, compared with a loss of $9.3 million a year ago. The company earned $1.09 a share, higher than the average 67-cent estimate of four analysts surveyed by Bloomberg. It was Sotheby’s top profit since the second quarter of 2008, when it earned $95.3 million.

Sotheby’s improved its results by offering fewer guarantees to sellers, which in 2008 cost the auctioneer $52.6 million as the art market contracted. Its auctions last year also emphasized less expensive work, for which Sotheby’s charges higher commissions on a percentage basis.

The company earned almost $21 in commissions from every $100 of auction sales, compared with about $16 in commissions a year earlier, according to its annual report filed with the U.S. Securities and Exchange Commission.

“Lower-priced items have bigger margins,” Chief Financial Officer William Sheridan said in an interview.

Declining Sales

Auction sales declined 7 percent for the quarter and 54 percent for the year, to $2.3 billion. Christie’s International said in January that its auctions totaled $2.9 billion.

“Our business is to focus on the high end of the art market,” William Ruprecht, Sotheby’s chief executive officer, said in a conference call with analysts. “Not to be the biggest but the best.”

Ruprecht said the art market may have hit bottom.

“The worst of the recent market appears behind us and there is enormous demand for works of art of great quality,” he said.

In addition to cutting staff, Sotheby’s reduced pension contributions and required unpaid furloughs for some employees. The workforce declined by 19 percent in 2009, to 1,323 employees, as expenses fell by 30 percent.

For the year, Sotheby’s lost $6.5 million, compared with a profit of $26.5 million in 2008 and $213 million in 2007.

Sotheby’s shares rose $2.21, or 9 percent, to $26.51 as of 4:15 p.m. in New York Stock Exchange trading. The share price more than doubled in 2009, though it remained less than half of its peak set in October 2007.

Asked about market share relative to Christie’s, Ruprecht took a jab at his closely held rival.

“There’s only one company that has audited financials,” he said, referring to his own. “I wouldn’t begin to speculate on what the accurate number there is.”

Christie’s spokeswoman Alexandra Buxton said in an e-mail that the company “upholds the highest reporting standards and its financial statements are audited at half and full year ends.”

To contact the reporter on this story: Philip Boroff in New York at pboroff@bloomberg.net.

Sotheby’s Reports Quarterly Profit After Cost Cuts (Update3) - Bloomberg.com