(Bloomberg) — Nintendo Co . reported worse-than-expected first-quarter earnings on Wednesday as a weaker yen failed to offset declining hardware and software sales.
The Kyoto-based company reported operating profit of ¥101.7 billion ($763 million) and sales of ¥307.5 billion in the three months to the end of June, missing analysts’ average estimates of ¥115.2 billion and ¥115.2 billion, respectively. ¥332.1 billion. The company said production bottlenecks have affected Switch sales and 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 forecast for its PlayStation unit by 16 percent last week after sharply reduced game sales 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 the loss of stay-at-home demand from Covid-19, which Sony blamed for reduced playtime on its platform. The weak yen was a bigger contributor to Nintendo, whose spending is largely denominated in the local currency.
Sales of Switch software are expected to accelerate towards the end of the year with the release of new entries in the hit Pokémon and Splatoon franchises during the holiday season.
“For a 5.5-year-old system, the Switch is still performing extremely 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 a sticking point for the company, as lingering component shortages and this year’s increased material costs are likely to put pressure on its outlook. Nintendo stuck to its forecast to sell 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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