THE WALL STREET JOURNAL. ***** Wednesday, July 31, 2019 |B5
that higher tariffs would ulti-
mately damage the U.S. econ-
omy,” Sony finance chief Hi-
roki Totoki said Tuesday.
The U.S. and China are re-
suming talks this week to re-
solve their trade conflict.
In May, President Trump in-
creased import tariffs on $200
billion of Chinese goods to
25% from 10%. He has threat-
ened to place the tariff on an
additional $300 billion of Chi-
nese exports, including Play-
Station consoles, if negotia-tions with Beijing fall apart.
Last month, Sony together
with rivals Nintendo Co. and
Microsoft Corp. submitted a
letter to the U.S. trade repre-
sentative’s office to make the
case against tariffs.
Mr. Totoki said Sony hadn’t
decided how it would respond
to an expansion of tariffs, but
was studying its options, in-
cluding asking consumers to
bear part of the burden. Tar-
iffs to date “haven’t affected
us that much, but we shouldremain vigilant about the po-
tential risk,” he said.
The PlayStation business
constitutes Sony’s biggest unit
by profit.
Sony is planning to intro-
duce a next-generation console
as soon as 2020. It has said
the next machine would in-
clude some more expensive
technologies that could lift the
price, even without tariffs.
Sony said Tuesday that
profit for the April-June quar-
ter fell 33% from a year earlierto ¥152 billion ($1.4 billion).
Sales of the PlayStation 4
console, released in late 2013,
were weaker than expected,
and Sony cut its sales projec-
tion for the year ending March
2020 by one million units to 15
million units. It sold 17.8 mil-
lion units the prior fiscal year.
A stronger yen weighed on
earnings, as did lower commis-
sion fees from free-to-play
games on the platform, includ-
ing Epic Games Inc.’s “Fort-
nite.”TOKYO— Sony Corp. said it
would need to raise U.S. retail
prices of its PlayStation con-
soles if the Trump administra-
tion goes ahead with a higher
tariff on Chinese-made video-
game machines, warning such
a move would hurt consumers.
Contract manufacturers in
China account for most Play-
Station production.
“We believe, and therefore
have told the U.S. government,BYTAKASHIMOCHIZUKISony Says Tariff Would Boost PlayStation Price
$2.8 billion of art during the
first half, down 22% from a
year earlier.
The privately owned house
said it would wait until the
end of the year to divulge
sums for any additional, pri-
vate art sales.
Christie’s said it plans to
keep fighting hard for con-
signments at the top end of
the market, having sold 60% of
the highest-price pieces that
came to market during thefirst half. It said it sold 83% of
its auction offerings overall.
Sotheby’s is undergoing a
season of flux as it prepares to
go private, having agreed last
month to be bought by French
telecom tycoon Patrick Drahi
for $2.7 billion, ending its 31-
year run as a public company.
Mr. Drahi will pay $57 a share
for the house. On Tuesday, the
New York-based company’s
shares closed at $58.90.
Tad Smith, Sotheby’s chiefexecutive, said the proposed
buyout remains on track.
Among individual catego-
ries in the first half of the
year, Sotheby’s sold $851.1
million in contemporary art,
down 9% from a year earlier,
and $697.7 million in impres-
sionist and modern art, a 5.5%
decline. The house sold $125.3
million in jewelry, as well as
$126.2 million of art online.
Sotheby’s top sale during
the first half was a $110.7 mil-lion Claude Monet painting of
“Haystacks” that sold in May
to an unidentified woman who
sat in the second-to-last row
of Sotheby’s salesroom in New
York.
Christie’s top lot for the
season was a $91 million “Rab-
bit” sculpture by Jeff Koons.
The art market tends to
quiet down in August but will
get tested anew at fall sales in
London, Hong Kong and New
York.Sotheby’s sold $3.1 billion
of art during the first half, a
10% drop from a year earlier
and a sign that the art market
could be hitting speed bumps
after several zippy seasons.
Collectors are still chasing
hard after middle-market
pieces priced under $20 mil-
lion, but market watchers said
fewer appear willing to ante
up for the $100 million-plus
trophy pieces that once piqued
the interest of top collectors
the world over. The auction
house said concerns over
Brexit also took a toll.
ArtTactic, a London firm
that tracks auction perfor-
mance, said in a report last
week that newly wealthy Asian
buyers also appear to be scal-
ing back after several years of
nonstop art shopping, a spree
that buoyed sales of Asian art
as well as Western categories
of modern art and jewelry.
Sotheby’s total comprises
$511 million in privately bro-
kered art sales, down 6% from
a year earlier, and $2.6 billion
in art auction sales, down
8.7%.
Rival company Christie’s
said last week it auctioned offBYKELLYCROWEARNINGS WATCH
ALTRIACigarette Sales Drop
Amid Turn to VapingAltria Group Inc. says ciga-
rette sales are declining faster
than it expected as smokers pick
up e-cigarettes and give up tra-
ditional smokes.
Some 13.8 million people in
the U.S. were e-cigarette users
as of June, up from 12.2 million
at the end of last year, Altria
Chief Executive Howard Willard
said on a call with analysts
Tuesday. Among those, more
than seven million now use e-
cigarettes exclusively, the com-
pany estimates. In February, the
Marlboro maker had put that
number at around six million.
As a result, Altria now proj-
ects U.S. cigarette-industry unit
sales to decline by 5% to 6% this
year,upfrom4%to5%,andto
fall at a compounded annual rate
of 4% to 6% through 2023, fur-
ther propelled by states increas-
ing the minimum tobacco-pur-
chase age to 21.
“If somebody goes from
smoking...all the way to exclusive
e-vapor use, that could have a
modeststepuponthecigarette
decline rate,” Mr. Willard said.
Altria last year invested $12.8
billion to take a minority stake
in vaping startup Juul Labs Inc.,
which has fueled a boom in U.S.
e-cigarette sales.
—Jennifer Maloney
and Robert BarbaGRUBHUB
Spending to Attract
New Diners RisesGrubhub Inc. reported lower
profit and cut its revenue expec-
tations for this year as it spends
more to acquire new diners amid
mounting competition among
food-delivery companies.
The company is facing rising
competition from rivals, particu-
larly DoorDash Inc. That com-
pany has struck restaurant deals
and raised billions of dollars re-
cently, fueling a rapid expansion
across much of the U.S.
Grubhub said orders were up
and diners bought more fre-
quently during the quarter ended
in June. Executives said they are
working to improve efficiency,
but also pushing into smaller,
less dense markets that tend to
be more expensive to serve.
Grubhub’s shares fell 12%.
—Heather HaddonMERCKCancer-Drug Success
Helps Raise OutlookMerck & Co. raised its expec-
tations for revenue and adjusted
earnings for the year as sales
and earnings at the pharmaceu-
tical company rose in the second
quarter.
Merck’s profit was $2.67 bil-
lion, up 56% from the compara-
ble quarter a year prior, as salesclimbed and restructuring costs
fell.
Adjusted earnings were $1.30
a share. Analysts polled by Fact-
Set were expecting adjusted
earnings of $1.16 a share.
Sales rose 12% to $11.76 bil-
lion. Analysts were expecting
$10.96 billion. The company said
sales of cancer treatment
Keytruda rose 58%.
The company said it now ex-
pects revenue to be between
$45.2 billion and $46.2 billion for
the fiscal year. In April, it said it
was expecting between $43.9
billion and $45.1 billion. Analysts
are expecting $44.71 billion.
—Allison PrangMASTERCARDBuyer Confidence
Lifts Profit, RevenueMastercard Inc. said its profit
rose in the second quarter,
boosted by higher revenue and a
drop in operating costs.
The global payments com-
pany reported a profit of $2.05
billion, up 31% from the compa-
rable quarter a year earlier. Earn-
ings were $2 a share, up from
$1.50 a share. Adjusted earnings
were $1.89 a share, up from
$1.66 a share.
Net revenue rose 12% to
$4.11 billion, while operating ex-
penses fell 0.8%. A year earlier,
the company’s results included a
$225 million litigation provision.
—Allison PrangJuul, in which the Marlboro maker holds a minority stake, has fueled a boom in e-cigarettes.CRAIG MITCHELLDYER/ASSOCIATED PRESS
Under Armour Inc. said its
North American sales declined
in the second quarter and the
athletic-apparel maker low-
ered its outlook for the region,
sending its shares down
sharply Tuesday.
The company reported a 3%
drop in sales in North Amer-
ica, its biggest market, and
said it expects a decline for
the full year. Previously, Under
Armour had projected flat
sales in the region for 2019.
The results come after rival
Nike Inc. reported higher sales
in its latest quarter, including
strong demand in its domestic
market. Other competitors, in-
cluding Lululemon Athletica
Inc., have also been increasing
sales in North America.
Under Armour’s Class A
shares fell 12% to $24.08, but
remain more than a third
higher on the year.
Chief Executive Officer
Kevin Plank said in a confer-
ence call that the company has
been focusing on overhauling
its operations and that those
efforts will begin to bear fruit.
“We believe that operational
strength is what will truly un-
lock our creative stroke for
this company,” he said.
In 2017, Under Armour sales
hit a wall, and Mr. Plank
moved to restructure the com-
pany, cutting jobs and hiring
an outsider, Patrik Frisk, as
president. The sportswear re-
tailer also focused on perfor-
mance attire rather than fash-
ion-driven garments.
For the latest period, the
company reported a loss of
$17.3 million, or 4 cents a
share, compared with a year-
earlier loss of $95.5 million, or
21 cents a share. Its revenue
rose to $1.19 billion from $1.17
billion on strong international
growth.
—Michael Tobin
contributed to this article.BYKHADEEJASAFDARUnder
Armour’s
Sales
Disappoint
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Sotheby’s Faces Slower Art Market
Collectors chase
midrange-priced
pieces, eschewing the
most expensive itemsThe auction house said it sold $851.1 million in contemporary art in the first half of the year, a decline of 9% from a year earlier.STEPHEN CHUNG/LONDON NEWS PICTURES/ZUMA PRESSNY