All That Glitters In The Auction World Is Not Gold....

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Posted By: bruce Dorskind

Sotheby's loses $14M on auction guarantees

Minimum price guarantees made to art sellers comprised the majority of Sotheby's third-quarter loss, which missed Wall Street forecasts.

Sotheby’s reported a quarterly loss that was narrower than a year earlier but missed Wall Street forecasts as the auction house took $14.6 million in pre-tax losses on auction guarantees at its Impressionist art sales this week.

Manhattan-based Sotheby’s lost $20.9 million, or 33 cents per share, in the third quarter, primarily on auction guarantees, or fixed-price promises made to sellers regardless of whether their art is sold. The company lost $30.7 million, or 50 cents a share, during the same period last year.

Auction guarantees have become a sticking point for auction houses like Sotheby’s and rival Christie’s International. In August, Sotheby’s received board approval for up to $500 million of guarantees each year, and at the end of that month said it had outstanding guarantees of $378.1 million, with another $95 million earmarked for pending offers.

With 78% of its low-value prediction for a Nov. 14 sale already guaranteed, Sotheby’s could be up against more losses before the year is out. Guarantees of at least $174 million have been made for paintings by artists that include Francis Bacon and Mark Rothko, according to according JPMorgan Securities analyst Kristine Koerber.

Third-quarter revenue at Sotheby’s climbed 48% to $85.1 million. Analysts had expected losses of 30 cents per share on revenue of $79.2 million.

Sotheby’s Chief Executive William Ruprecht remained optimistic. “The art market has shown considerable strength since the beginning of our fall season,” he said, noting that Sotheby’s third quarter usually represents only about 7% to 10% of its annual auction sales.