(Bloomberg) — Nintendo Co. unveiled plans to split its stock into 10 from October, issuing an appeal to investors as the Mario creator struggles to revitalize a five-year-old Switch console and overcome a global chip shortage.
The Kyoto-based company projected full-year operating income below analysts’ estimates after reporting a mere 0.6% rise in profit for the March quarter. It’s expecting to sell 21 million Switch devices this year, shy of the 21.7 million anticipated.
Its shares briefly climbed as much as 2.5% in Tokyo before giving up those gains Wednesday, underscoring persistent concerns about its ability to navigate supply chain snarls that have hindered production. The hybrid Switch console, updated with an OLED model last year, was constrained during the period by issues with component supplies and logistics.
Nintendo’s forecasts are often conservative, but the disappointing set of numbers also illustrated the Switch’s slowing momentum. Even when production and deliveries return to normal, the aging device will struggle to maintain its previous sales pace, said Toyo Securities senior analyst Hideki Yasuda.
Nintendo Fluctuates as Analysts Assess Guidance, Stock Split
What Bloomberg Intelligence Says
Nintendo may be destined for another round of declines in the top and bottom line in fiscal 2023 ending March, particularly as both hardware and software sales are likely to be weaker this year, barring the release of an upgraded, yet unconfirmed new Switch console. A sales boost from higher video-game software units, largely driven by new Pokemon games, was more than offset by lower Switch units, leading to a 3.6% fall in fiscal 2021 net sales. Software sales may reach 210 million units this year amid new game releases, vs. last year’s 235.1 million, while hardware falls to 21 million from 23.1 million driven by chip shortages, based on latest guidance.
– Nathan Naidu, analyst
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Sony, whose flagship PlayStation 5 game console also suffered supply constraints from component shortages and logistics disruptions, reported disappointing results Tuesday. Nintendo President Shuntaro Furukawa told reporters he saw no end to the semiconductor crunch, which has constrained global production of cars and smartphones.
“The outlook on chip shortages remains unclear. We do not see an end to this situation,” he said.
Nintendo’s operating profit inched higher to 120.2 billion yen ($922 million) in the quarter ended March, with sales growing 6% to 375.13 billion yen. Analysts had expected about 120.1 billion yen in profit and 373.4 billion yen in revenue. The company projected full-year operating income of 500 billion yen, versus projections for 612.7 billion yen.
Read more: Sony to Buy Back Stock After Profit Falls Short of Estimates
Nintendo underperformed in spite of the yen’s weakening against the dollar and euro. Roughly four-fifths of the company’s revenue comes from overseas and its software sales, whose production costs are mostly yen-denominated, benefited from the home currency’s fall. During the quarter, it also recorded strong sales of Pokémon Legends: Arceus, a game that’s become the fastest-selling title in the long-running franchise, according to its publisher.
Nintendo plans a string of high-profile game releases from its in-house development studios this year, including additions to the Pokémon, Splatoon and Xenoblade Chronicles franchises. Furukawa has argued that hardware sales can be sustained through the release of attractive new titles.
On Tuesday, the Nintendo president declined to comment when asked during a media briefing about when his company might unveil the next iteration of its marquee console.
“The only option for Nintendo to prop up the hardware’s sales momentum is to release upgraded hardware,” Yasuda said.
(Updates with share action from the fourth paragraph)
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