Sotheby's $515m guarantee to secure the collection of its former owner A. Alfred Taubman, along with other expenses, has resulted in a $12m loss for the company, president and chief executive Tad Smith said during its fourth quarter 2015 earnings call earlier today.
The company’s net income for the quarter was $74m to $79m, around the same as last year’s ($74m). Still, the company expects to lose money in the fourth quarter, between $10m and $19m, in part due to “charges related to the Taubman Collection”, Smith said. The huge guarantee was a gamble, and the result of intense competition between Sotheby’s and Christie’s for the right to sell Taubman’s art.
“We now project to lose approximately 1%, or $6m, of the guaranteed amount, due to a shortfall in sale proceeds” from the Taubman collection, he said. “Also, approximately $6m of sale-related expenses were incurred in the fourth quarter of 2015, which is on the low end of the usual 1% to 2% of direct costs as a percent of sales.”
Smith put the value of the remaining Taubman inventory, which Sotheby’s plans to sell through the rest of the year, including during next week’s Old Master auctions, at a low estimate of $24m, although he said this may result in further losses for the company.
