Nintendo warns of big slowdown in Switch console sales this year

NINTENDO expects to sell 15 million units of its Switch console this fiscal year, showing the extent of the slowdown for its six-year-old flagship product.

The Kyoto-based games maker’s guidance falls shy of an already cagey average analyst estimate of 15.7 million units, which has taken into account a deceleration in hardware sales in recent months. The company also forecast operating income of 450 billion yen (S$4.4 billion) this fiscal year, close to the 455.3 billion yen average estimate.

“We try to not only put one system in every home, but several in every home, or even one for every person,” Nintendo said in a statement accompanying its earnings report on Tuesday (May 9). The company sold 18 million Switch units in the year to March and reported operating profit of 93.8 billion yen for the quarter, down 22 per cent on the previous year. Its quarterly net sales were down 18 per cent, to 306.5 billion yen.

The hybrid Switch console, released in 2017, is slowing down more quickly than the company had once anticipated. And there are no imminent plans for a successor, either.

“Sustaining the Switch’s sales momentum will be difficult in its seventh year,” president Shuntaro Furukawa said on a call after the results. “Our goal of selling 15 million unit this fiscal year is a bit of stretch. But we will do our best to bolster demand going into the holiday season so that we can achieve the goal.”

Furukawa added that no new or upgraded hardware is factored into Nintendo’s annual forecast. He previously described the 2022 holiday season as disappointing, telling analysts that sales were affected by the sluggish global post-Covid reopening and the economic malaise brought about by inflationary pressure.

The poor holiday performance came even with a pair of record-setting debuts – Splatoon 3 in September and Pokémon Scarlet and Violet in November – suggesting the market for Nintendo’s hardware is close to saturated. The Switch product family has surpassed 120 million units sold, the company said in its statement.

The company lacked a blockbuster release in the first quarter, though it plans to release a much-anticipated sequel to The Legend of Zelda: Breath of the Wild this Friday and also got a tailwind from the April opening of The Super Mario Bros. Movie, a well received collaboration with animation studio Illumination.

Still, hardware sales are unlikely to rebound now that Nintendo faces rising competitive pressure from Sony Group, which is finally able to ramp up production and deliveries of its PlayStation 5 and aims to sell more than 25 million units this year.

Analysts don’t foresee Nintendo being able to bolster sales of the Switch with hit games the way it has done in the past and, moreover, the company isn’t expected to release a successor console for at least another year.

“We expect Nintendo will not release the next-generation hardware over the next 12 months,” UBS Securities analyst Kenji Fukuyama said in a letter to clients ahead of the earnings report. “Nintendo’s valuation is very likely to shrink until the launch of the new hardware.”

Nintendo shares were given a boost this year by Saudi Arabia’s Public Investment Fund, which built up its position in the company to 8.3 per cent, making it the largest external shareholder. BLOOMBERG