Sotheby’s held its third quarter earnings call today. Overall, the results were positive. CEO Tad Smith outlined further his core strategy and discussed plans to improve the London and New York real estate, including resolving the issue of whether Sotheby’s would sell its current building and move or refurbish the building for better access by visiting crowds.

The conference call also highlighted a continuing expansion of Sotheby’s loan book. But there was some distraction. The first issue was the Taubman guarantee which Smith made a point of declaring an extraordinary situation, not a strategic turn.

CFO Patrick McClymont made clear that Sotheby’s had sold, at what they considered an attractive price, some of the significant lots that were bought in during the Taubman sale and that based upon estimates and fees the company would end up covering the entire guarantee.

Because the auction house does not earn fees until the guarantee is met, Sotheby’s warned there would be an impact on Q4 commissions which sent the stock down 6% during a trading session where the S&P 500 was down 1%.

The Financial Times focused on Smith’s comments that buyers at the very top were getting more discerning and buyers in the middle seem to be feeling macro-economic strains:

the larger pool of people buying less expensive works is “a little bit more sensitive to macroeconomic uncertainties,” resulting in a “sluggish” pace in mid-range items and lower-priced lots “generally moving better than we expected”. he said.

“That is emblematic of a market that is solid. It creates buyers that are discerning, quality-oriented, but careful.”

Sotheby’s points to selective art market  (FT.com)