Sotheby's (BID) Accounts Receivables Double in 2007 -WSJ

The Wall Street Journal published an article in today's newspaper in which it discussed a potential accounts receivables problem at Sotheby's (NYSE: BID). The article, entitled "Is Street Turmoil Coloring Art Market?", brings to attention a large increase in the amount of money owed by buyers who bought art at a Sotheby's auction.

In 2007, Sotheby's accounts receivables rose to $835 million, more than two times the 2006 amount. Sotheby's said that more than $520 million in receivables comes from the fourth quarter. Also, this accounts receivable total does not reflect about $6 million in "doubtful accounts", which is debt that Sotheby's believes will most likely not be paid.

Bill Sheridan, Sotheby's CFO, told the WSJ that "accounts receivables and guarantees aren't a problem." He said the accounts receivables increased by so much due to increased sales at Sotheby's: consolidated sales rose 51% during 2007.

Furthermore, Sheridan told the WSJ that the higher number was also due to extended payment deadlines for its November auctions, which isn't an unusual. He said this action was taken in order "to help support and market sales."

In contrast, some art dealers told the WSJ that Sotheby's is "letting buyers wait as long as three or four months before paying", which is certainly not normal.

Whatever the case, the article points out that these dealers are not seeing a problem with the wealthy Sotheby's customers falling behind on their payments. [BCS]

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