Sotheby’s First-Quarter Loss Narrows as Art Sales Increase

Apr 24, 2014 8:56 am ET

(Updates with advisory firm’s report in fourth paragraph.)

April 24 (Bloomberg) -- Sotheby’s, the auction house being challenged by activist investor Daniel Loeb over its leadership, said losses in the first quarter narrowed from the year earlier period, in a preliminary statement designed to fend off the hedge-fund manager.

The New York-based company said it expects to report a pretax loss of $6 million, down 81 percent from $32 million a year earlier, according to the statement yesterday. It attributed the results to an increase in sales of Impressionist and contemporary art.

In the unusual move, Sotheby’s pushed out the figures before its annual shareholder meeting on May 6 in New York. Sotheby’s and Loeb have been lobbying investors to vote for their competing slates of directors ahead of the meeting, when the new board is expected to be selected. Loeb has criticized Sotheby’s management and its deteriorating competitive position relative to rival Christie’s for months.

Institutional Shareholder Services, an advisory firm, today recommended that investors vote for two of the three board members proposed by Loeb’s Third Point LLC.

ISS said shareholders should vote for Loeb, chief executive officer of Third Point, and jewelry designer Olivier Reza because they are active art collectors. Loeb is “a significant owner” of Sotheby’s shares, at 9.3 percent as of October, and “brings the sort of deep financial and analytic acumen” the Sotheby’s boardroom needs, ISS said in its report.

Some Change

ISS said Loeb presented a “compelling case” that Sotheby’s financial performance is “substantially worse than its own record would suggest is possible” and that “it appears that introducing some change into the boardroom is warranted.”

Sotheby’s said today in a statement that “now is not the time to diverge from Sotheby’s leadership and its strategic plan.”

“We believe that Sotheby’s shareholders should vote for all of Sotheby’s director nominees,” the auction house said in the statement.

Third Point declined to immediately comment on the ISS report and said it would have a letter for Sotheby’s shareholders later today.

Full Results

The first quarter results “demonstrate that we are executing on our strategic plan and are well positioned to further build on the substantial momentum and record results we achieved in 2013,” Bill Ruprecht, Sotheby’s chief executive officer and chairman, said in yesterday’s earnings statement. Full results are set to be released about May 7, the company said.

Sotheby’s typically posts a loss or small profit in the first and third quarters and a larger gain in the second and fourth periods, when its biggest semi-annual auctions are held.

Its marquee Impressionist and modern art evening sale in New York is set for May 7 and its contemporary-art sale is scheduled for May 14.

The company said it expects to report net auction sales of about $730 million in the first quarter, a 40 percent increase from the year earlier.

Sotheby’s evening sale of Impressionist and modern art in London in February tallied 163.5 million pounds ($274.37 million), up 57 percent from a year before and surpassing its high presale estimate of 128.4 million pounds. Of 89 offered lots, only 10 failed to find buyers, Sotheby’s said. The auction house’s contemporary art sale in London the same month tallied 87.9 million pounds, an 18 percent increase from a year earlier.

Sotheby’s reported the results after the close of trading. Its shares fell 1.5 percent to $40.65 yesterday in New York trading, extending the decline this year to 24 percent.