Sluggish Game Sales Drives Down Nintendo’s Profits
Despite continued strong sales of the Switch, Nintendo's (TYO:7974) profit was driven down by a stale library of games that failed to excite consumers as the company missed earnings expectations by a long shot.
Nintendo posted a 10% decline in quarterly profit, on the back of slow software sales, defying analyst expectations. Operating profit for the three-month period ending in June was down 10.2% year-over-year to $252 million, with revenue inching up 2.4% to $1.58 billion.
Nintendo reports it has sold approximately 37 million Switch consoles after shipping 2.13 million units in the past quarter, a 13% increase year on year. During its earnings presentation, Nintendo maintains its full-year sales forecast of 18 million units for the year ending next March.
Nintendo says it will launch the Switch Lite -- a cheaper, handheld-only version of the console -- in September for $199. This is aiming to replace the Nintendo 3DS in the company's lineup, which is about to hit its end of life.
To date, Nintendo has sold 210.13 million software units for the Switch.
In comparison, Nintendo's 3DS has sold 75.28 million hardware units and 379.60 games for the console according to company data.
While Nintendo has shunned mobile gaming, with the exception of Pokemon: Go, it seems that the company's attitude on this topic is changing. This quarter saw the limited release of Dr. Mario World, though initial data shows that it's not a breakout hit like Pokemon: Go. Smartphone game revenue rose 10% in the quarter. Gamers and analysts are awaiting the release of the upcoming Mario Kart Tour, which should substantially drive up revenue in the company's mobile segment.
Nintendo has a number of blockbuster games planned for the second half of the year Pokémon Sword and Shield, Luigi’s Mansion 3 and a remake of the Legend of Zelda title Link’s Awakening.
Going forward, Nintendo forecasts an operating income of approximately $2.4 billion on $11.5 billion in revenue.
Nintendo's shares have risen 39% year-to-date.