Nintendo Cuts Full-Year Sales, Operating Profit Forecastsby and
Boost from Pokemon Go fails to make up for sales outlook slump
Shares decline in European trading after results release
Nintendo Co. cut its sales and operating profit outlook for the year, as the popularity of Pokemon Go failed to make up for sliding sales of 3DS and Wii U games. The company’s shares fell as much as 7.4 percent in German trading.
Operating profit for the current fiscal year through March will be 30 billion yen ($288 million), down from the previous outlook of 45 billion yen, the Kyoto-based company said in a statement Wednesday. Revenue will now be 470 billion yen instead of 500 billion yen.
Investors are looking for signs that Nintendo’s embrace of mobile gaming will pay off, with the company’s shares up more than 45 percent this year. Still, the results show a limited impact from the summer’s blockbuster hit Pokemon Go, which is partially owned by Nintendo. Anticipation is building for Super Mario Run, the company’s first game for iPhones, which will debut in December. The shift is critical because the game maker is facing slowing sales of existing platforms, and failed to impress investors last week when it introduced its next-generation console, the Switch.
“They have the Switch coming out, but nothing else,” said Serkan Toto, founder of of consultant Kantan Games Inc. “The software lineup for the the next couple of months on both of their existing consoles is pretty small, and on mobile they only have Super Mario Run.”
Nintendo expects to sell 2 million units of Switch in its first month after it goes on sale in March, Nintendo President Tatsumi Kimishima said on Wednesday. He said the financial impact has already been factored into its revised forecast.
Net income for the quarter that ended September was 62.8 billion yen, thanks to a 120 billion yen boost from Pokemon Go and a gain on the sale of a stake in the Seattle Mariners baseball team. That topped the average projection for 5.76 billion yen, based on analysts’ estimates compiled by Bloomberg.
Pokemon Go, which became available during the last quarter in July, set off a social phenomenon as hundreds of millions of players worldwide ventured outside to hunt for virtual pocket monsters. Researcher App Annie estimated that it grossed $600 million in its first 90 days, becoming the fastest mobile game in history to do so.
But financial impact to Nintendo is limited because the company only owns partial stakes in the game’s developer Niantic Inc. and Pokemon Co., which owns the license to the franchise. Analysts have estimated anywhere between seven to 15 percent of the app’s sales will hit Nintendo’s bottom line.
Sales of the 3DS handheld device and the Wii U console, which debuted in 2011 and 2012, respectively, have continued to stagnate. In the six months through September, software revenue from the platforms dropped 32 percent to 66.7 billion yen, while sales of hardware declined 36 percent 65.9 billion yen.
While it’s common for hardware purchases to trail off at the end of a console’s life-cycle, software usually holds up as a large base of owners continue to buy titles. Nintendo will be hoping the worldwide release of two new Pokemon titles for the 3DS in November will bolster profit during the current quarter.
“Sales of Wii U and 3DS have peaked,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co. “There’s a sense of disapproval toward the Switch, so we’ll be paying attention to any statements the company might make.”