Sotheby’s 4Q16 Earnings Call Notes

Thomas Smith

Collectors responded enthusiastically

“we were cautiously optimistic in November, but as it turns out, the weight in that statement should have been on optimism as collectors responded enthusiastically to the great collections and works we secured for sale. Second, greater pricing discipline and intelligent deal-making contributed to yet another quarter of improved auction commission margins. Third and most importantly, this quarter demonstrated that when the market stabilizes, let alone when it returns to its secular growth trajectory, our Company is poised to capitalize on the upturn and do very well for our shareholders.”

The average outcome in the US is higher, but there’s also more risk

“In terms of – I’d like to separate tax reform and set that aside for just one second, and I’ll come back to it, Oliver – in terms of how people are feeling, if you look at the stock market, if you look at generally the growth profile in the United States, I think on average people are feeling noticeably better about it. I think if you look at Europe, they are feeling a little bit better about that. At the same time, the probability of an unusual outcome has gently gone up. So in other words, the distribution of outcomes has become on average much more favorable but the distribution of outcomes has become a bit flatter, which is to say that everyone is feeling better but there’s a higher probability, very gently higher probability, that there is some risk around it. And that is a good segue into what are the kinds of risks. One thing is that at least in the United States there is a high degree of enthusiasm for some pro-growth policies, including regulation changes and also particularly tax reform. With respect to tax reform, it has lots of positives. If the corporate rates become more favorable and there’s repatriation, that’s definitely better for investment. The stock market is already probably benefiting from that. And if more money gets put into our pockets and we’re feeling better about things, that will definitely have a positive impact going forward. If either the prospects for either legislation in the United States dim or people get a look at what the legislation is and they decide they don’t like it quite as much, I said a minute ago, the distribution of outcomes would be a bit flatter even though the average goes up. Well, that would be an example of a situation where they may not be as enthusiastic and that would be a risk to the marketplace. I have to tell you, I feel quite good about it and I’m thinking things are going to go rather well.”