Sotheby's 2018 H1 Revenue Up but Profits Drop 26% Due to Guarantees

Sotheby's reported a 2% revenue increase to $345.6 million in Q2 2018, with sales up 15% to $2.4 billion. Private sales surged 57% to $296 million. However, net income fell 26% to $57.3 million from $76.9 million in Q2 2017. For the first half of 2018, total sales reached $3.5 billion (including $937 million in contemporary art), a 22% increase, with private sales up 63% to $543 million. Yet net income dropped 23% to $50.8 million from $65.6 million in H1 2017. The profit decline is attributed to aggressive guarantees on high-value lots, notably Amedeo Modigliani's "Nu couché (sur le côté gauche)" (1917), estimated at a record $150 million and sold for $157 million via a third-party irrevocable bid, and Pablo Picasso's "Buste de Femme de Profil (Femme ecrivant)", estimated at $45 million but only reaching $36 million from the guarantor. Additionally, the rescheduling of Hong Kong spring auctions from Q2 to Q1 shifted $130 million in sales and $20 million in profit, as noted by CFO Mike Goss. CEO Tad Smith explained that in a competitive market, guarantees reduce margins, especially when lots underperform.