By ,
Published January 13, 2015
War, disease and a weak dollar hammered Sotheby's for a loss in the first quarter, just as the revered auction house was emerging from an image-tainting price-fixing scandal.
Parent company Sotheby's Holdings Inc. (search), on Wednesday also cited restructuring charges and higher payroll expenses along with the costs of settling the government's antitrust investigation, for the loss which was nearly 20 percent wider than in the same quarter last year.
"Property gathering for our spring season was affected by the current economic environment, uncertainties related to the war in Iraq (search) and the health crisis in Asia resulting from SARS (search)," said President and Chief Executive Officer William Ruprecht.
"We are guardedly optimistic for the rest of the year," Chief Financial Officer Bill Sheridan told Reuters, stressing the auction house was still collecting items for its major London sales in June.
But Wall Street did not seem to share the confidence and Sotheby's shares were down 5.6 percent at $7.59 on the New York Stock Exchange (search) in Wednesday afternoon trading.
Sheridan said most of the collecting for this year's major New York sales occurred in February and March, as the storm clouds of war in Iraq gathered and then the fighting began.
"Sellers were saying: 'Do I really want to sell now or wait till later?"' he said.
Asked about Severe Acute Respiratory Syndrome, or SARS, in Asia, Sheridan noted Sotheby's market in the region represented only 5 percent to 7 percent of its revenues.
"As far as SARS, we had some good news with very strong sales in Hong Kong a week and a half ago, but who can predict?
"It is an important market, but there is concern about travel. Asians are asking if they should travel to Geneva to buy jewelry or to London or Paris."
Sotheby's, whose businesses include art-related financial services and real estate brokerage, said its first-quarter loss widened to $27.6 million, or 45 cents per share, from $23.1 million, or 38 cents per share, a year earlier.
The company said first-quarter results historically represent just 9-13 percent of annual auction sales and it usually reports a loss for the period.
"Our overall results were adversely effected by the foreign exchange impact of the weakening U.S. dollar," said Ruprecht.
This resulted in a $1.7 million increase in the operating loss in the first quarter. He also said restructuring charges of $5.8 million, employee retention costs of $3.5 million and antitrust related special charges of $800,000, were significantly higher than in 2002.
The announcement comes after Sotheby's posted a $6.5 million fourth-quarter loss, which included a $20 million charge for its share of an international settlement of an antitrust lawsuit over price-fixing.
Former Chairman A. Alfred Taubman, who owns some 22 percent of the company's class A limited non-voting common stock, is expected to be released from prison this week to a halfway house. There he will complete his year-long sentence for fixing commission prices while chairman of Sotheby's.
"All the antitrust litigation is behind us," said Sheridan, noting the recent sale-leaseback of Sotheby's New York headquarters allowed it to pay down $100 million in debt.
In March, Ruprecht said that because of economic uncertainties, he would not take a $3 million bonus in 2003.
https://www.foxnews.com/story/war-sars-hammer-sothebys-for-wider-loss