Sotheby's posts surprise loss; commissions off

By Martinne Geller

NEW YORK (Reuters) - Sotheby's (BID.N: Quote, Profile, Research) said on Friday that lower art auction commissions and higher operating expenses led to a quarterly net loss, surprising Wall Street and sending the company's shares down 9 percent.

Wedbush Morgan Securities downgraded Sotheby's shares to "hold" from "buy."

"Lower commission margins have resulted from increased competitive pressure as well as Sotheby's decision to reduce their guarantee exposure, and should continue despite the company's decision to raise prices again today," Wedbush analyst Rommel Dionisio wrote in a research note.

The New York-based auction house reported a quarterly net loss of $12.4 million, or 19 cents per share, for the first quarter, compared with a net profit of $24.3 million, or 37 cents per share, a year earlier.

Analysts on average were expecting a quarterly profit of 10 cents per share, according to Reuters Estimates.

The latest results included a 12 percent increase in salaries and related costs due to higher full-time wage and stock compensation costs, and a 20 percent increase in general and administrative costs due to higher professional fees and travel and entertainment expenses. That was partially offset by lower employee benefits expense.

Revenue fell 12 percent to $129.3 million as auction and related revenue fell 17 percent.

Due to the seasonal nature of the art auction market, Sotheby's said the first quarter is usually slow, adding that it has posted a first-quarter loss in all but two of the last 18 years.