Art Market Watch

SOTHEBY’S $5.8 BILLION FOR 2011 IS SECOND-HIGHEST YEAR EVER

“I’ll keep polishing my crystal ball,” said Sotheby’s CEO Bill Ruprecht when asked about projections for 2012 during a conference call on Wednesday announcing the company’s 2011 year-end results. Luckily for Ruprecht, the primary focus was on breaking down the company’s numbers for 2011, with no divination required.

For 2011, Sotheby’s notched total sales of $5.8-billion, up from $4.8 billion in 2010 and the firm’s highest since the record-breaking year of 2007, when the total was $6.2 billion. With its $5.8 billion total, Sotheby’s barely bested arch-rival Christie’s, who announced total sales of $5.7 million earlier this year.

Ruprecht noted that Sotheby’s 21 percent increase over its 2010 total is the result of healthy bidding and strong sales worldwide, and he was quick to point out that Sotheby’s achieved this sum by selling about half the volume of the auction house’s “traditional competitor.”

In terms of actual revenue, Sotheby’s brought in $831.8 million, an increase of 7 percent over 2010, with a net income of $171.4 million (which was also an increase of 7 percent).

Of particular interest is the increase in private sales by $320 million, or 65 percent, for a record total of $815 million. Christie’s also reported a 44 percent increase in private sales, amounting to $808 million, which suggests that big-ticket business is increasingly conducted behind closed doors and away from the high-profile kerfuffle of conventional auctions.

Ruprecht noted that these earnings help offset slimmed profit margins, down 16.6 percent from 18.3 percent, for the highest end consignments -- the result of fierce competition (with Christie’s, presumably) to secure this kind of property.

Totals from single-owner sales rose by 72 percent last year, to $923 million, suggesting that the auction house agreed to host more of these sales (which add to the cost of doing business, last year to the tune of $3.2 million) as a way to lure sellers who might choose to consign with one auction house over another if they’re promised their own sale (and glossy catalogue).

Naturally, other expenses increased as well. Marketing expenses rose by 23 percent due to increased sponsorships of museums and other cultural institutions, brand promotion in China and other emerging markets, and an overhaul of the Sothebys.com website (and we know how persistent those technical glitches can be).

Salaries and related costs increased $15.3 million (or 6 percent), largely due to a 12 percent ($13.9 million) rise in full-time salaries -- good for the employees, though there’s no mention of the art handler’s dispute here.

Sotheby’s did take the opportunity to look ahead. Ruprecht said that the company is opening a new showroom in Hong Kong in about eight weeks so that it can maintain a year-round presence there. This followed an earlier point that the “three geographic engines” fueling their business, namely America, Europe and Asia, “are contributing to our [Sotheby’s] success in roughly equal proportions.”

Ruprecht admitted that unease over the broader economic situation had impacted fourth-quarter earnings and made it more challenging to secure consignments in the first quarter of this year. Still, he highlighted the star lot of the May Impressionist and modern sale, Edvard Munch’s The Scream, which may bring up to $80 million, as well as the contemporary property by Roy Lichtenstein, Sleeping Girl (1964), which is estimated at $30 million-$40 million.

For complete, illustrated results, see Artnet’s signature Fine Art Auctions Report.

JESSICA MIZRACHI is a decorative arts specialist who writes on the art market.