Nintendo lowers net profit forecast

Published February 7th, 2023 - 07:58 GMT
Nintendo lowers forecast
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ALBAWABA — Nintendo lowered its full-year net profit forecast on Tuesday, saying the global chip shortage and other supply chain problems had hit console sales through its third quarter as electronics makers face a tough global macroeconomic environment.


The Japanese gaming giant lowered its net profit forecast for its fiscal year ending March 31 to 370 billion Japanese yen, from 400 billion yen, in part from lower than anticipated performance by its Switch gaming console.


Nintendo, which competes with PlayStation creator Sony and Xbox maker Microsoft, sold 8.2 million Switch units in the latest quarter, a 23 percent slide on-year.


"Overseas sales were not as large as seen in the previous two holiday seasons, though production constraints due to semiconductor shortages have largely been resolved," Shuntaro Furukawa, Nintendo president, told an online press conference.


The company expects to sell 18 million Switch units for the fiscal year ending March 2023, down from a previous forecast of 19 million, while anticipating sales of 205 million software units, down from its previous estimate of 210 million units as sales declined 4 percent on-year in the April to December period.


While new games such as "Pokemon Scarlet", "Pokemon Violet" and "Splatoon 3" have performed well, hardware sales by unit declined 21 percent on-year "mainly due to a shortage of semiconductors and other component supplies that impacted production until around late summer", the company said.


"Nintendo could not completely prevent falling victim to the current economic environment and is likely disappointed itself with the quarter," Serkan Toto, CEO of Tokyo-based games consultancy Kantan Games, told CNBC. 


"There is definitely new hardware in the works, the big question marks are when it will be released and weather it will be an upgraded Switch, an even more beefed up ‘Switch 2’ or a completely new platform," Toto added.


The Switch, launched in 2017, in part helped Nintendo's 2020-21 annual net profit soar to a record 480 billion yen thanks to booming demand for indoor entertainment during COVID-19 lockdowns but its sales along with its Lite and OLED variations are slowing as the console ages.


Hideki Yasuda of Toyo Securities told AFP ahead of the earnings release that "it would be a big surprise if Nintendo were to increase the production of Switch" at this stage of its lifecycle, cautioning that "it's still too early to talk about the next game console", despite rumors swirling over Nintendo's next big hardware product.


Meanwhile, Furukawa announced plans to raise salaries by 10 percent for current and incoming employees in Japan even after cutting its full-year forecasts for revenue and earnings, saying the burden on employees is increasing and the move will help strengthen the company’s "hiring power".

"It’s important for our long-term growth to secure our workforce," Furukawa insisted.



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