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Sothebys (NYSE:BID)
Gross Profit
$695.8 Mil (TTM As of Mar. 2016)

Sothebys's gross profit for the three months ended in Mar. 2016 was $81.9 Mil. Sothebys's gross profit for the trailing twelve months (TTM) ended in Mar. 2016 was $695.8 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Sothebys's gross profit for the three months ended in Mar. 2016 was $81.9 Mil. Sothebys's revenue for the three months ended in Mar. 2016 was $106.5 Mil. Therefore, Sothebys's Gross Margin for the quarter that ended in Mar. 2016 was 76.84%.

Sothebys had a gross margin of 76.84% for the quarter that ended in Mar. 2016 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Sothebys was 88.92%. The lowest was 77.24%. And the median was 86.27%.

Warning Sign:

Sothebys gross margin has been in long term decline. The average rate of decline per year is -2.7%.


Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Sothebys's Gross Profit for the fiscal year that ended in Dec. 2015 is calculated as

Gross Profit (A: Dec. 2015 )=Revenue - Cost of Goods Sold
=961.494 - 218.789
=742.7

Sothebys's Gross Profit for the quarter that ended in Mar. 2016 is calculated as

Gross Profit (Q: Mar. 2016 )=Revenue - Cost of Goods Sold
=106.531 - 24.671
=81.9

Sothebys Gross Profit for the trailing twelve months (TTM) ended in Mar. 2016 was 278.413 (Jun. 2015 ) + 81.876 (Sep. 2015 ) + 253.681 (Dec. 2015 ) + 81.86 (Mar. 2016 ) = $695.8 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Sothebys's Gross Margin for the quarter that ended in Mar. 2016 is calculated as

Gross Margin (Q: Mar. 2016 )=Gross Profit (Q: Mar. 2016 ) / Revenue (Q: Mar. 2016 )
=(Revenue - Cost of Goods Sold) / Revenue
=81.9 / 106.531
=76.84 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Sothebys had a gross margin of 76.84% for the quarter that ended in Mar. 2016 => Durable competitive advantage


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Sothebys Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Gross_Profit 584.6788.2534.2417.0688.5738.6681.7738.8774.8742.7

Sothebys Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
Gross_Profit 298.4121.2294.777.6281.4128.7278.481.9253.781.9
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