Nintendo’s earnings miss echoes Sony’s gaming woes

The Kyoto-based company reported operating profit of 101.7 billion yen (US$763mil or RM3.4bil) and sales of 307.5 billion yen (RM10.3bil) in the three months to the end of June, missing average analyst estimates of 115.2 billion yen (RM3.84bil) and 332.1 billion yen (RM11.1bil), respectively. (File pic shows a Nintendo Switch console.)

TOKYO: Nintendo Co reported worse-than-expected first-quarter earnings as a weaker yen failed to offset declining hardware and software sales.

The Kyoto-based company reported operating profit of 101.7 billion yen (US$763mil or RM3.4bil) and sales of 307.5 billion yen (RM10.3bil) in the three months to the end of June, missing average analyst estimates of 115.2 billion yen (RM3.84bil) and 332.1 billion yen (RM11.1bil), respectively.

The company said manufacturing bottlenecks affected Switch sales and its current production is behind schedule. It expects to catch up on production from the late summer.

Software sales declined to 41.4 million from 45.3 million in the same period a year ago, while Switch units fell to 3.43 million units from 4.45 million.

The results echoed those of fellow console maker Sony Group Corp, which cut its full-year PlayStation division profit outlook 16% last week after significantly reduced games sales in the previous quarter.

Nintendo, whose flagship Switch console can be used both at home and on the move, appears to have also suffered from the loss of stay-at-home demand from Covid-19, which Sony blamed for the reduced playing time on its platform.

The weak yen made a bigger contribution for Nintendo, whose costs are largely denominated in its home currency.

US gamers spent 13% less on video games in the second quarter of this year compared to 2021, industry group NPD said.

The impact was more strongly felt by Sony, which reported that play time across PlayStation products was down 15% in the period.

Switch software sales are expected to accelerate toward the year’s end with holiday-season releases of new entries in the blockbuster Pokemon and Splatoon franchises.

“For a 5.5-year-old system, the Switch is still performing remarkably well,” said industry analyst Serkan Toto of Kantan Games.

“Nintendo’s software pipeline for this calendar year is chock-full of blockbusters like Splatoon 3. I am not worried about Nintendo, at least not for 2022.”

Hardware remains a pain point for the company, as prolonged component shortages and this year’s elevated materials costs are likely to put pressure on its outlook.

Nintendo stuck to its forecast to sell 21 million units of the handheld-hybrid console, down from 23 million in the previous year. — Bloomberg