Nintendo’s profit, sales beat estimates on Switch demand

Bloomberg

Nintendo Co.’s Switch is showing signs of becoming a money earner. The Kyoto-based company reported profit and sales that topped estimates as more people bought the new gaming machine, lifting prospects for brisk shipments during the holiday season. Operating profit for April-June, the Switch’s first full quarter on store shelves, was 16.2 billion yen ($145 million), exceeding analysts’ average projection for
10.6 billion yen. Revenue more than doubled to 154.1 billion
yen, beating the prediction for 139 billion yen.
Nintendo is betting that the Switch will fuel a new era of growth as more people embrace its dual role as a gaming device that can be used at home, or
on the go. That’s also raised questions over whether the company is abandoning its two-gadget strategy of selling consoles
and handheld gaming devices. While sales have been solid, analysts and investors are looking for signs that Nintendo will boost production or forecasts.
“The reason profit beat estimates is of course the Switch,” said Keiichi Kozera, an analyst at Tachibana Securities Co. “But it still feels as if they can grow unit sales some more. With the summer holidays approaching, I think sales will increase.”
Currency gains also helped to boost profit, after the yen fell 10 percent against the euro during the quarter, adding 7.1 billion yen to the bottom line. The game maker gets about a quarter of its revenue from Europe. The shares of Nintendo rose 2.8 percent in Germany. The stock is up more than 50 percent since the Switch went on sale.
Last month, the company apologized to customers in Japan for shortages and promised to increase production, without providing a timeline or further details. Nintendo sold 1.97 million Switch units during the quarter, compared with analysts’ estimates for 1.8 million to 2 million. The company kept its forecast for 10 million shipments through March, although analysts remain more bullish, projecting 13 million shipments this year, according to the average of estimates compiled by Bloomberg.
“Nintendo has already said they’ll increase production during the summer, so this is a chance to confirm how that’s coming along,” Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co., said
before the earnings release.
Switch demand in the latest quarter got a boost from the launch of several key titles, including Mario Kart 8 Deluxe, Arms and Minecraft. In total, the company sold 8.14 million Switch software titles during the period and kept its forecast for 35 million games this fiscal year.
Revenue from its smartphone business was 9.1 billion yen, down from 13.6 billion yen in
the previous quarter, when it launched the profitable free-to-play title Fire Emblem Heroes. Income attributed primarily to Pokemon Go was 3.3 billion yen, down from 3.5 billion yen in the prior period.
Still, the company has yet to share details on its upcoming mobile title Animal Crossing, which was originally scheduled to release in March. Nintendo President Tatsumi Kimishima has said he will aim for about two to three mobile titles per year. “They haven’t made clear indications here,” Kawasaki said. “We’ve also heard rumors about a Zelda title and so on, but the company hasn’t said anything.”