CultureGrrl

Sotheby's Stock Chart

There was a lot of news in Sotheby's First Quarter 2008 Earnings Conference Call this morning with investment analysts.

The lead-off revelations: The auction house's revenues ($129.3 million) declined $18.1 million (12%), compared to the first quarter of 2007. There was a first-quarter net loss of $12.4 million ($0.19 per diluted share) compared to net income of $24.3 million ($0.37, per diluted share) for the first quarter of 2007---a $36.7 million decline. First quarters are traditionally weak, with the biggest auctions coming in the second and fourth quarters.

Increased expenses played a significant part in the decline, but Sotheby's said that it was primarily due to lower auction commission margins, as compared to the same period last year. (The auction commission margin equals commission revenue divided by hammer price.) The margin was 13.6% in the first quarter of 2008, compared to 16.6% in the first quarter 2007. Commission margins are typically lower for higher-valued works.

To help boost those margins, Sotheby's will once again raise the fee charged to buyers, effective June 1---25% on the first $50,000 of the hammer price; 20% on the next $950,000 of hammer. (The current buyers premium is 25% of the first $20,000; 20% on the next $480,000.) The charge on hammer price above $1 million will remain at the current 12%.

There was a lot of interesting discussion about guarantees---the amounts that auctioneers sometimes agree to pay to sellers, whether or not the bidding actually reaches those amounts. In the Q&A with analysts, there was a suggestion---uncontradicted by the auction house's officials---that agreements to share a portion of the buyers premium with sellers are sometimes taking the place of guarantees as tools for attracting consignments.

Bill Ruprecht, Sotheby's president and CEO said:

We have been operating in an environment of uncertain economic times over the last nine months, so at the end of last year we focused even more keenly on managing our risks and limiting our exposures to guarantees by taking on fewer deals where we could have exposed our balance sheet to material losses....
 
Our traditional competitor [Christie's] had approximately $80 million more in guarantees than we did in this most recent 10-day period and by our calculations, we are, year to date, the only firm to have had meaningful profitable guarantee experience....Our competitor did not have strong results in the guarantee line.

When I asked Christie's to comment on the accuracy of these assertions, Toby Usnik, its head of public relations, would only say:

We are very pleased with our results for the week.

Sotheby's reported that its year-to-date sale totals, as of yesterday, were up 11% from last year. In his prepared conference call remarks (which you can read here), Ruprecht quietly corrected a claim made at Wednesday's postsale Impressionist/modern press conference: The average value of lots sold on Wednesday was $5.7 million, compared to $4.8 million (NOT $3.5 million) at Sotheby's weak Impressionist/modern sale last November---a less impressive increase than previously announced.

An interesting moment during the Q&A came when one analyst suggested that giving sellers a portion of the buyers premium is a consignment-getting technique now being used in lieu of offering guarantees. The analyst asked Sotheby's to provide regular reports not just on sale totals, but also on the currently undisclosed amount of the premium relinquished to sellers (which diminishes Sotheby's profit). Sotheby's officials did not refute the analyst's assumptions about the use of the rebate in lieu of guarantees, but they did not offer to change the method of reporting, observing that reports of auction commission revenues reflect the impact of the rebates.

Sotheby's stock is not reacting well to this morning's news: As of 11:38 a.m., it was trading at $24.94, down $2.53 (9.21%) from yesterday's close. One analyst asked whether, in light of the disconnect between share price and company health, management might consider a share buyback. The reply:

That's something we would look at and consider.

UPDATE: Usnik of Christie's e-mailed me with this additional observation about Sotheby's analysis of Christie's guarantees:

As a private company, we don't comment on this aspect of our financials, but we can confirm that all objects guaranteed were identified as such in our catalogue.

Italian Culture Minister Sandro Bondi

What I foresaw here (thanks to a helpful tip from Louis Godart) has now officially come to pass: Sandro Bondi has been named by the new Berlusconi government to replace The Great Repatriator, Francesco Rutelli, as Italy's minister of culture. (Above is his official portrait on the Ministry of Culture's website.) In addition to being head of Forza Italia, the political party of the recently elected prime minister, Bondi is a senator.

Here's his biography, as published yesterday by ANSA, the Italian news agency. Well connected politically, Bondi only has one cultural credential mentioned here. He is a published poet:

The son of a Socialist lumberjack who was forced to find work in Switzerland, Bondi, 49, is a former Communist and trade unionist who met Berlusconi through the sculptor who designed the premier's mausoleum.

He became a fervent acolyte of the charismatic mogul and has served as lightning rod for criticism of his boss in his role as Forza Italia spokesman.

He claims to appreciate the many satirical imitators of his priest-like style of dealing with journalists. Bondi is one of Berlusconi's closest aides and biggest fans but is still so in awe of his boss that he addresses him in the formal 'Lei' rather than the familiar 'tu' form. An ex-journalist and published poet, Bondi is proud of his humble background but even prouder of Berlusconi, to whom he has devoted many of the semi-serious poems that have gained a cult following in the Italian edition of Vanity Fair.

A philosophy graduate whose thesis was about an Augustinian preacher, Bondi is a devout Catholic whose books include "Secularists and Believers, a Common Faith" (2006) and "Forgiving God" (2007). He has a fear of heights and hates flying.

"Hates flying?" Does that mean he won't be following in the footsteps of his predecessor, who winged across the Atlantic to major American museums in order to formalize restitutions and compensatory loans?

Simon Shaw

Relief and satisfaction were palpable among Sotheby's Impressionist/modern experts at their press conference (which was viewable online) after tonight's big sale.

The sale's hammer price totaled $208.63 million ($235.33 million with buyers premium) for 52 lots, within a presale estimate of $203.9-280.1 million. (One lot was withdrawn before the sale, which is why the estimate range is lower than what I reported previously.)

Christie's hammer price and the number of lots it offered last night were higher---$246 million for 58 lots. But Christie's percentage sold by value (82%) and by lot (76%) fell short of those at Sotheby's---90% and 79%, respectively. Christie's hammer total fell short of that auction house's presale estimate range.

Americans took home 67% of the sold lots tonight at Sotheby's, compared to only 32% last night at Christie's. Go figure.

David Norman, worldwide co-chairman of Sotheby's Impressionist/modern department, exulted that last night's 90% sold total by dollar value was in line with what one would expect "when the market is strong and booming." The key, he said, was "keep the estimates appealing, choose the right property and promote it with zeal."

And maybe also bring in Simon Shaw (above), who arrived in February from Sotheby's, London, to become the head of New York's Impressionist/modern department. Shaw, who was chief spokesman during tonight's postsale press conference, emphasized that the average value of sold lots tonight was $5.7 million, compared to $3.5 million at Sotheby's lackluster Impressionist/modern sale last November.

"The decisions we took were vindicated this evening," Shaw crowed to the assembled journalists---those on the premises and those of us online. We who watched from home got to hear someone warn Shaw and Norman, before the start of the proceedings, that the microphone for online transmission was already live. Shaw immediately quipped:

I was just about to sing some Celine Dion.

"My (He)art Will Go On," perhaps?

For my coverage of the sale while it was still in progress (including record prices and the priciest of the buy-ins) go here. For Sotheby's official auction results (with buyers premium), go here.

The Big Lot, Léger's "Study for 'The Woman in Blue,'" 1919 (above), achieved a hammer price of $35 million---at the low end of its $35-45 million presale estimate, but enough to set a new auction record for the artist. There have been two unsold lots in the front 20. Only two sold below estimate.

More to come. It's not over till it's over.

UPDATE: More records, more buy-ins. Munch's "Girls on a Bridge," 1902, set an auction record for the artist, with a hammer price of $27.5 million. A new auction record for a Giacometti painting was achieved by "Portrait of Caroline," 1963, with a hammer price of $13 million. There have been a total of five unsold lots on the front 30.

SECOND UPDATE: There's only one big-ticket buy-in in this sale: Léger's "La Partie de Campagne," unsold at $10.5 million, against an estimate of $12-18 million.

At least the online headline is accurate, but even Carol Vogel, who in her NY Times post mortem emphasized the positive aspects of last night's so-so results at Christie's Impressionist/modern sale, could not possibly have agreed with the editors' headline (above) on Page B2 of today's newspaper:

Sale Results of Impressionist and Modern Art Exceed Expectations at Christie's

As you know from my late night post, the auction made a hammer-price total of $246 million, compared to a presale estimate of $287-405 million. By no measure did it exceed the auction house's professed expectations, other than for only eight of 58 lots that did exceed presale estimates.

Why Vogel and many other art-market scribes persist in comparing the $287-405 million presale estimate (which predicts total hammer price and DOES NOT include the buyers premium) with the $277.28-million final total (which DOES include the commission paid by buyers) defies reason. As CultureGrrl has already observed too many times, this statistical sophistry plays into the auctioneers' desire to make results look better than they really are, but it's comparing apples to oranges. Presale estimates must be compared with hammer prices to be meaningful, not misleading.

Even the higher total, inflated with the buyers premium, fell short of the auctioneers' hammer-price estimate. And the record-setting Monet did not exceed its presale estimate, as Vogel suggested in reporting the $41.4-million price with premium. She reported that Christie's presale estimate for the Monet was $35 million. It's possible that's what they told her after the sale, but last Friday, Christie's had e-mailed to me the various unpublished estimates, and the Monet was pegged at $35-40 million. Its $37-million hammer price last night fell squarely within the estimate, not above it.

I'm cautiously pessimistic about Sotheby's sale tonight. But given last night's iffy indications, there will be a lot of people, some with paddles, with an interest in having this sale to turn out well. Perhaps Sotheby's experts are doing whatever last-minute maneuvering they can to secure a low percentage of unsold works. We'll soon find out.

Top Lot: Monet, "Le Pont du Chemin de fer à Argenteuil," 1873, $41.48 million

Last November's anemic results at Sotheby's evening Impressionist/modern sale in New York did little to dampen the art market's overall ebullience. So I won't go so far as to say that Christie's lackluster performance tonight signals a market correction.

But even though it gave itself an exceptionally wide spread for its total presale estimate---$287-405 million---it failed to hit the target, achieving a hammer total of just $246 million ($277.28 million with buyer's premium). Some 14 of the evening's 58 works failed to sell: Two "vans" were among the vanquished---a racy Van Dongen of a gypsy dancer, estimated at $12-16 million, and a van Gogh landscape from 1887 that the auctioneers had thought would bring $13-16 million.

The sale was 82% sold by value, 76% by lot. Europeans enjoyed their currency advantage, taking home 52% of the sold lots, compared to only 32% for the dollar-disadvantaged Americans.

The big work of the evening, Monet's "Le Pont du Chemin de fer à Argenteuil," 1873, achieved a hammer price of $37 million, against an estimate of $35-40 million. Its $41.48 million total price (with buyer's premium) set an auction record for the artist. Auction records were also set for Rodin, Giacometti and Miró.

Only four of the unsold works bore guarantees (undisclosed prices that Christie's and/or third-party guarantors agreed to pay the owner, even if the works did not sell). The priciest of those was the van Dongen. The record-setting Monet had also been guaranteed.

For the full list of results, go here. Works that have "Estimate" (rather than "Price Realized") in the righthand column are the ones that failed to sell.

Another fizzle: Apparently the Wall Street Journal's "On the Block" is not going to weigh in "from the auction floor and updating this blog with the latest sales and sightings during and after the evening auctions," as it had promised on its website and as I reported earlier today. They removed that online phraseology, and they have posted nothing about tonight's results at this writing.

So I've broken my promise too, blogging tonight when I said I wasn't going to (although I did not actually attend the sale).

If it manages to turn in a better performance tomorrow, Sotheby's has a chance to improve its competitive standing.

Francis Bacon, "Triptych," 1976, on exhibition at Sotheby's

After attending Sotheby's annual stockholders meeting  this morning (as a journalist, NOT an investor), I prowled the Sotheby's showroom, watching auctioneer Tobias Meyer adroitly woo clients in front of Bacon's "Triptych" (above): "I've been waiting a long time for this," he told one Bacon admirer with whom he spent considerable time.

After that conclave concluded, I received his impressions of the current level of buyer interest at a time when "consumer confidence" has been called into serious question:

I anticipate that the great things will do extremely well. The rest? We will see.

Much, he acknowledged, will depend on buyers from "emerging markets," such as Asia and Russia:

They are hard to predict. We don't know what they will do until the night. The 20th-century art collectors on Fifth Avenue we can predict. There's a dialogue there....[The emerging-market buyers] are not as passionate as the good American collectors. They are still skittish. They may not have any Cubist paintings, they may not be interested in Cubism, but they want a trophy and there it is.

Last fall, when much was said about the probable impact of global wealth, American buyers still predominated. Now the auctioneers anticipate that the weak dollar will stimulate European bidding. As Bill Ruprecht, president and CEO of Sotheby's, commented at today's annual meeting:

The dollar feels very cheap as a currency to buy in, if you buy from a Euros perspective or a Sterling perspective.

He also noted (as I also recently discussed here):

In an environment of very uncertain economic times, we have focused most keenly on managing our risks and limiting our exposures to guarantees, by taking on fewer deals where we exposed our balance sheet to material losses. Sales to date continue to be strong in their reflection of the steady demand for great works of art against a turbulent backdrop.

I have not heard about similar risk-reduction strategies from Christie's, but they don't need to be accountable to importunate stockholders. One of the questions today at Sotheby's annual meeting was why the price of the stock remains so depressed. In his introductory remarks, the auction house's chairman, Michael Sovern, had ruefully observed:

Would that our stock price took full account of the fact that 2007 was a record year for our great company. We realized a return on equity of 47%, fueled by the highest revenues in company history---$918 million---and the highest operating income in company history---$276 million.

But neither Sovern nor Ruprecht could answer the question as to why the stock, trading in the 50s as of early November, has since then been stuck in the 30s and now the 20s. No matter how well Sotheby's has done before or since, it's had a hard time living down the failure of one important work to sell at its big Impressionist/modern sale last November. Its shares plummeted in the immediate wake of the fabled failure to find a buyer for the late van Gogh landscape, "The Fields." (It still has not been sold.)

No matter how well it has done in its London sales this year, Sotheby's could use a very solid showing tomorrow night in New York to solidify its competitive footing. Its evening Impressionist/modern sale is estimated at $207-$284 million for 53 works, compared to Christie's $287-$405 million for 58 works.

In keeping with my "Blog Slog" commitment to post less and get out more, I will not be covering the upcoming sales at the frenzied, real-time pace with which I've previously attacked them. (I will, in fact, be at a major museum's press dinner tonight, instead of balancing catalogue and notepad at my usual perch at the Christie's Impressionist/modern sale.) I will eventually weigh in if I feel I can provide some counterbalance and commentary beyond the observations of the dedicated art-market press.

But never fear: The Wall Street Journal's On the Block is on the case. It will weigh in "from the auction floor and updating this blog with the latest sales and sightings during and after the evening auctions of Impressionist and modern art on May 6 at Christie's and May 7 at Sotheby's. We'll also be on hand for the post-war and contemporary art auctions on May 13 at Christie's, May 14 at Sotheby's, and May 15 at Phillips."

You go, Kelly Crow.

For two excellent pieces of presale reporting and analysis in today's Wall Street Journal, go to Crow's article here; Alexandra Peers' here.

One of the scholarly offerings at the Metropolitan Museum's "Superheroes" bookshop

It's too bad that Philippe de Montebello's successor couldn't have been in place by now. Then PdM's record for excellence wouldn't have been marred by his Director's Forward for the catalogue of the Metropolitan Museum's Superheroes show, opening Wednesday. Extolling "the influential reach of comic-book superheroes on contemporary tastemakers" is not a worthy parting message for the dean of American art museum directors. If only he could have taken his bow after the openings of the current Courbet and Poussin exhibitions. It's for overseeing such sweeping, scholarly shows that we want to remember him.

Instead, we now have "Superheroes: Fashion and Fantasy"---an enterprise whose foolish wall texts make WhitneySpeak sound lucid. Its inept attempt to impart the weight of intellectual seriousness to thin air casts the much maligned Star Wars (organized by Smithsonian Institution Traveling Exhibition Service and seen in 2002 at the Brooklyn Museum) in a more favorable light.

The Met's wall text includes these memorable passages:

Just as Superman's costume proclaims him a super man, Spider-Man's costume proclaims him a spider man.

With his thick neck, bulging tendons, and throbbing veins he [the Hulk] suggests the turgidity of male arousal.

In the conflict between good and evil---the basis of traditional superhero narratives---comic-book heroes are enlisted to fight the good fight, which usually involves upholding American utopianism as expressed in the Declaration of Independence and the Constitution.

The two primary paradigms of superherodom are the superpowered superhero and the non-superpowered superhero.

I think the label writers may have read too many comic books. At least the show is up-to-the-minute. It includes Robert Downey Jr.'s cladding from the new megahit, "Iron Man":



But back to the unfortunate Philippe, who got stuck writing (or at least signing his name) to:

Superman's blue unitard, flowing red cape, and distinctive "S" emblem, Batman's black cape and bat cowl, ...Wonder Woman's red bustier and star-spangled shorts, not only proclaimed their amazing powers, but they also provoked new designs in avant-garde haute couture, ready-to-wear, and high-performance sportswear....The visitor will not be surprised to find the Thierry Mugler motorcycle bustier, with its polychrome handlebars and sideview mirrors, evoking Ghost Rider.

Actually, I WAS pretty surprised---both by Philippe's professed fascination with such things and by the Mugler muddle (especially its headdress, fashioned from Coke cans):



So what about the show itself? Its outlandish designer fashions (again with the Coke cans)...



...made Lynda Carter's Wonder Woman costume seem subtle and tasteful:



But I did find a must-have fashion statement for everyone on my Fathers Day list, courtesy of John Galliano:



"With its...fetishistic hardware and enormous hose-pipe phallus, it both reflects and represents the pulsing force of the virile body," the wall text informs us, apropos the above "ensemble."

Of course by now you've suspected that these curmudgeonly comments are a bunch of sour grapes. I did, however, get to see the red carpet for last night's gala, co-chaired by George Clooney and Julia Roberts before they did---in the afternoon:



The red carpet-ers were still hard at work as I flew over Fifth Avenue on my magic notepad:



Poor gorgeous George never got his chance to admire this legendary superheroine:
 


His loss....Had I been invited, I probably would have donned this Mugler stunner:

Sotheby's ad for fashion plates

We impecunious art-market scribes are a bearish bunch. Most of us can't afford a square inch of a van Gogh, so we may enjoy a certain charge of schadenfreude from envisioning the eventual comeuppance of those who can pay for the whole painting. As Marion Maneker recently wrote, in an astute article for Slate:

How can you tell that it's nearly auction season in the art market? When the press begins predicting an imminent crash....Everyone wants to be the first to identify the next crash.

Hey, I did it first, almost two years ago, after which, as we all now know, the market continued its unabated surge. This was tremendous prescience on my part: Eventually, I'm quite likely to be right.

Now along comes Carol Vogel, in yesterday's NY Times "Arts & Leisure" section, making some dramatic assertions about the current state of the market:

The creative business maneuvers adopted by the auction houses to land big consignments and encourage buyers speak of desperation. Sotheby's and Christie's are at the point where they are often willing to forgo profits just to win commissions [did she mean, "consignments"?] and beat out the other on sales totals. In addition to the guarantees granted to sellers, which in some cases this season are said to be even higher than the works' sales estimates, the two companies are buying works of art outright, advancing sellers money ahead of the sales and in rare cases even becoming involved in sellers' real estate transactions.

These confidential deals are so abundant that it is difficult to judge whether a strong evening sales result is a smoke screen. But if profits dry up, such face-saving strategies can't last forever.

This disturbing description of auctioneers-gone-wild is unsupported in Vogel's story by factual evidence, let alone named (or even unnamed) sources. Advances against sales and even auction-house ownership of some works are nothing new and are publicly acknowledged by the auction houses. But the suggestion that the guarantees, in some cases, exceed the presale estimates is astonishing, if true. (Guarantees are the amounts that the auctioneers, in some cases, agree to pay to consignors, even if bidding falls short.)

I'm not saying that Vogel is wrong. I'm sure that a professional of her stature would not engage in baseless conjecture. I'm just saying that a prominent journalist, alleging that a "smoke screen" may be concealing the true state of the art market, needs to provide readers with something less vaporous than her own unsubstantiated say-so.

The screen that I'm concerned about is more opaque than mere smoke: It's the lack of transparency about third-party guarantors (such as dealers or private collectors), who in some cases commit to placing an irrevocable bid to support an auction price. Their incentive, aside from supporting market levels, is a share in the auctioneer's profit if the bidding exceeds the amount of the guarantee.

We don't know which works have received bids from third-party guarantors, nor are we informed when these market-bolsterers are the winning bidders. We do know, from the published conditions of sale and from presale announcements, that guarantors bidding on certain lots may be "interested parties," who may (according to Sotheby's, but not Christie's "conditions of sale") have knowledge of the "confidential" reserve (the seller's minimum price). What we don't know about these third parties is specifically who they are (i.e., the artist's dealer or the representative of the artist's estate); whether they are indeed bidding; whether they do (unlike most bidders) know the level of the reserve (below which the object won't sell); whether they are the winning bidders.

With all these confidential side deals going on, with auction houses' possessing direct financial interests in certain works and in certain private galleries, and with sellers sometimes receiving even more than hammer price (thanks to a kickback of the buyers commission), we've come a long, troubling way from the traditional clearcut role of the auction house as disinterested broker between buyer and seller. The IRS used to regard auction prices as the best gauge of fair market value---the price paid by a willing buyer to a willing seller, with neither side under compulsion and both sides possessing full knowledge of the facts. But has "fair market value" now become unfair market value? A lot of boundaries have been blurred.

On a lighter note: Christie's won the product-placement wars by scoring a page-wide reproduction at the top of Vogel's article---the Bacon triptych that it will offer later this month. Sotheby's, however, took matters into its own hands by placing a full-page NY Times ad (above) yesterday for the central panel of its larger, higher-estimated Bacon triptych in the "Styles" section---more commonly associated with fashion and jewelry ads. Do the same people who crave Prada and Harry Winston want to accessorize with a harrowing depiction of "a headless body...savaged by a swirling bird of prey" (as the Sotheby's catalogue describes this panel)?

I guess the auctioneers understand their target market better than I do.

Chic for a Sheikh? Mark Rothko's $72.8-million "White Center (Yellow, Pink and Lavender on Rose)," 1950

While we're waiting for some contemporary art auction records to be set later this month, The Art Newspaper claims to know the names of big winners of auctions past. Sarah Thornton reports:

Ever since their culture minister, Sheikh Saud bin Mohammed Al Thani, was arrested and investigated (and then pardoned) for alleged misuse of public funds, the collecting clan (whose cultural assets include Al Jazeera) has been keeping a low profile. But we can reveal that they are now major players in the modern and contemporary market acquiring, among other things, Mark Rothko's "White Center (Yellow, Pink and Lavender on Rose)," otherwise known as the "Rockefeller Rothko," which sold at Sotheby's in May 2007 for the world-wide record price of $72.8 million--the most expensive post-war work of art to sell at auction ever....

When "Hanging Heart (Magenta/Gold)" was bought at Sotheby's New York for $21 million hammer price ($23.6 million with buyer's premium) by Gagosian for Victor Pinchuk, a Ukrainian billionaire with a taste for high-impact figurative work, it...made [Jeff] Koons contemporary art's uncontested top dog.

So Sarah, since you know so much, who bought the Guennol Lioness?

COMING SOON: AUCTIONEERS GONE WILD? UNFAIR "FAIR MARKET VALUE"