(Bloomberg) — Nintendo Co . reported worse-than-expected first-quarter earnings on Wednesday as a weaker yen failed to offset falling hardware and software sales.
The Kyoto-based company reported operating profit of 101.7 billion yen ($763 million) and sales of 307.5 billion yen in the three months to the end of June, missing analysts’ average estimates of 115.2 billion and 332.1 billion yen, respectively. The company said that manufacturing bottlenecks affected Switch sales and that its current production is behind schedule. It is expected to catch up with production from the end of summer.
Software sales fell 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 disappointing results echoed those of fellow console maker Sony Group Corp., which cut its full-year profit outlook for its PlayStation division by 16 percent last week after significantly reducing sales of games in the previous quarter. Nintendo, whose flagship Switch console can be used both at home and on the go, also appears to have suffered from a loss of at-home demand due to Covid-19, which Sony blamed for the reduction in play time on your platform. The weak yen made a bigger contribution to Nintendo, whose costs are largely denominated in its domestic currency.
Switch software sales are expected to accelerate towards the end of the year with the holiday season releases of new entries in the hit Pokemon and Splatoon franchises.
“For a 5.5-year-old system, the Switch is still performing very well,” said industry analyst Serkan Toto of Kantan Games. “Nintendo’s software for this calendar year is full of blockbusters like Splatoon 3. I’m not worried about Nintendo, at least not for 2022.”
Hardware remains an issue for the company, as prolonged component shortages and high materials costs this year are likely to weigh on its outlook. Nintendo met its forecast of selling 21 million units of the portable hybrid console, down from 23 million the previous year.
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(Updates with more details from the earnings release)
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