Sotheby’s to Record Restructuring Charge of Approximately $14 Million
Buyers Premium Increased on sothebys.com
NEW YORK CITY – Sotheby’s Holdings announced January 11that the company will record a restructuring charge in the fourth quarter of approximately $14 million related to firm’s strategic and operational review announced in August 2000. The restructuring charge, which will impact the company’s auction segment, will consist principally of severance- related and facility-related costs and the write-off of “certain investments as a result of the curtailment of certain activities.” Worldwide headcount will be reduced by approximately eight percent (to approximately 1900 employees), principally in the European, North American and Internet auction businesses.
“We estimate that annualized cost savings following the implementation of the restructuring plan will approximate $20 million in the Live auction business and – in conjunction with cost reduction measures already taken during 2000 – will total an additional $25 million in our Internet operations” said Bill Ruprecht, president and chief executive officer of Sotheby’s Holdings. “These savings will be initiated during 200l and should be realized fully in 2002”.
“We have spent several months reviewing all of our auction operations around the world and we believe that this restructuring will make the company more competitive both in key high-end markets worldwide and in the middle market in London and will also enhance profitability through the realization of significant cost savings,” Ruprecht continued. “To achieve this goal, Sotheby’s expects to focus resources on high-end markets, including the important paintings and jewelry categories. Through the consolidation of certain departmental resources and sales, we will be reducing operating costs in lower-end markets, which contribute a much lower percentage of revenues. We plan to achieve operating efficiencies by managing certain markets globally rather than on a regional basis, including our principal fine arts categories of Impressionist, contemporary, Old Masters and Nineteenth Century paintings as well as jewelry and Asian works of art. In addition, the consolidation and integration of our live and Internet operations in our flagship York Avenue location, which we expect to take place by the end of the first quarter of 2001, will also contribute to cost savings.
“As we reviewed our European operations, it became very clear that our flagship Bond Street salesroom had insufficient capacity and that we would need an additional salesroom in London to strengthen our position in that important market. We believe that over time this new salesroom at Olympia in Kensington, West London, will allow us to well serve the middle market, which continues to be an important source of business for us in Europe, while our Bond Street headquarters will be the location for our most prestigious sales. Any such costs related to the new salesroom are not included in the restructuring charge.”
“In a further step towards accelerating our move toward profitability in our online business, we will be increasing the buyer’s premium for our online auctions on sothebys.com,” said Ruprecht. Effective March 5, 2001, the buyer’s premium will be raised to 15 percent for the first $15,000 and will remain at ten percent thereafter. This is a change from the current flat rate of ten percent.
Sotheby’s notes more than $60 million of online sales in its first year as an Internet auctioneer. Its Web network includes more than 5,000 dealers. Among the firm’s online highlights were a Warhol work on paper, “Gold and Silver Shoe,” which sold for $63,250; a leaf from the Gutenberg Bible, which sold for $48,400; and a copy of the Declaration of Independence, which sold for $8.14 million.
