Sotheby’s reported earnings this morning that show flat revenue despite an increase in auction and private sales. The culprit seems to be incentive compensation costs which were paid this year when they were not last year in a belt-tightening situation.

For the three months ended June 30, 2017, Sotheby’s reported net income of $76.9 million, representing av$12.1 million (14%) decrease when compared to the same period in the prior year, as a higher level of Agency commissions and fees and a lower effective income tax rate are more than offset by a higher level of indirect expenses. Although second quarter net income decreased by 14%, diluted earnings per share decreased by only 6%, from $1.52 to $1.43, due to a lower number of common stock shares outstanding as a result of our share repurchase program. Total revenues for the second quarter of 2017 are up 5% from $298.7 million to $314.9 million, largely due to increased inventory sales from the prior period.

For the six months ended June 30, 2017, Sotheby’s reported net income of $65.6 million, or $1.21 per diluted share, representing a $2.5 million (4%) or $0.18 per diluted share (17%) improvement when compared to the same period in the prior year. After excluding certain charges in the current and prior periods, Adjusted Net Income* decreased $2.8 million (4%), from $68.9 million to $66.1 million, as a $21.5 million (6%) increase in Agency commissions and fees was offset by a higher level of indirect expenses and a $3.4 million (11%) decrease in revenues from Sotheby’s Financial Services, our art financing company. Despite this decrease in Adjusted Net Income*, Adjusted Diluted EPS* increased $0.09 (8%) from $1.13 to $1.22, as a result of the significant level of common stock repurchases made over the last 18 months.

During this period, we have reduced the number of shares outstanding from 65.8 million to 52.7 million shares (20%). Total revenues for the first half of 2017 are up 24% from $405.2 million to $502.4 million, largely due to a significant increase in inventory sales over the period.

Down in the details there a number of countervailing forces—inventory sales were up as Sotheby’s cleared storage and took some losses to free up its balance sheet, private sales were up, currency fluctuations had an effect on results and some travel and entertainment expenses were up—but the essential takeaway from these numbers is that this is what Sotheby’s can earn in a strong art market.

We will have more a detailed discussion of Sotheby’s business for AMMpro subscribers next week.