Sotheby's flags art market recovery following Q3 loss

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Sotheby's, the world's largest publicly traded auction house, said it was past the bottom in the art market with net auction sales trending higher in the second half of the year.

Sotheby's shares, which fell 9% after the bell on a wider quarterly loss, recouped most of their losses following the positive commentary on trends in its earnings call.

In regular trade, the shares closed up 15% on the New York Stock Exchange at USD 18.21 Thursday, a day after the company conducted an USD 180 million impressionist and modern art sale that blew past even the most optimistic estimates.

"The art market is clearly in a better place than it was last autumn and the early spring of this year," Chief Executive Bill Ruprecht said.

Net auction sales as a%age of pre-sale estimates will be higher in the second half of 2009, compared with the first half, Ruprecht said on a conference call with analysts.

The fourth quarter got off to a great start with almost two-thirds of the sales coming in at, or above, the company's highest pre-sale estimate, Ruprecht added. "I think the art market is back. It will improve gradually," JMP Securities analyst Kristine Koerber said.

The auctioneer, which competes with privately held Christie's, also said it was on track to exceed its USD 160 million stated expense savings target.

Sotheby's scaled back operating expenses by 38% or about USD 50 million during the third quarter.

Q3 loss 'meaningless'?

New York-based Sotheby's posted a third-quarter loss of 89 cents a share, up from a loss of 73 cents a share, a year earlier, hurt by higher annualized effective income tax rate.

"We anticipate the effective tax rate will be less volatile in future years as earnings return to more normalized levels," Chief Financial Officer Bill Sheridan said.

Excluding restructuring charges, Sotheby's posted a loss of 88 cents a share.

Revenue slumped 41% to USD 44.9 million, hurt by an 80% decline in net auction sales.

"Third quarter in my opinion is somewhat meaningless. It's just 10% of their overall business," analyst Koerber said.

"It's all about what happened last night and what's going to happen in the coming weeks. The second and fourth quarter drive majority of their business."

Analysts were expecting a loss of 31 cents a share, on revenue of USD 65.7 million, according to Thomson Reuters I/B/E/S.