Nintendo doubles net profit forecast after Switch performs well

Nintendo nearly doubled its full-year profit forecast Monday as it pointed to sizzling sales of its Switch games console and a cheaper yen.

The Kyoto-based video game giant said it now expects a net profit of 85 billion yen ($748 million) for the fiscal year to March 2018, well up from an earlier estimate of 45 billion yen, as it boosted its revenue and operating profit estimates.

Nintendo also raised sales projections for Switch, which was launched in March with a price tag of US$300 and is seen as a new pillar for the company’s earnings.

It now expects to move around 14 million Switch consoles in the current business year, up from an earlier 10 million forecast.

Switch, capable at home and on the go, blends Nintendo’s console and handheld device business with its fledgling mobile gaming strategy, which got a big brand win with Pokemon Go’s success in the summer of 2016.

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“Switch is in excellent shape as sales of both hardware and software are growing steadily,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo, before the earnings announcement.

Nintendo is positioning itself for the year-end holiday shopping season with Switch, while a cheaper yen has also bolstered its bottom line.

A drop in the currency inflates the value of profits earned abroad by Japan’s exporters.

During the April-September period, the company launched several headline game titles for Switch, including “Mario Kart 8 Deluxe” and its popular “Splatoon2”.

Its “Super Mario Odyssey” released last week is also expected to increase sales for the second half, the firm said.

“A potential risk is a hardware shortage where they could not keep up with surging demand,” said Yasuo Imanaka, an analyst at Rakuten Securities in Tokyo.

For the first half to September, Nintendo’s net profit reached 51.5 billion yen, up 34.5 per cent from a year earlier.

Operating profit came in at 40 billion yen, reversing a year-earlier operating loss, while revenue was 374.0 billion yen —  nearly triple last year’s level.

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Nintendo shares have nearly doubled since Switch’s launch, although they slipped 0.25 per cent to end at 42,870 yen on Monday. The earnings were announced after markets closed.

Nintendo said its “Super Mario Run” and other smartphone games racked up sales worth 17.9 billion yen, more than five times higher than a year earlier.

Smartphone game app “Pokemon Go” sparked a worldwide craze last year that has captured customers beyond Nintendo’s traditional fan base.

The mobile app, developed by an outsider, significantly spiced up its brand and spilt over to boost the popularity of the overall Pokemon franchise.

 

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