Nintendo smashes expectations with best quarter since 2008

The Kyoto-based games company reported operating profit of 229.7 billion yen. PHOTO: AFP

TOKYO (BLOOMBERG) - Nintendo raised its annual forecasts a second time after continued momentum for the Switch console helped the company to its best quarterly earnings since 2008.

The Kyoto-based games company reported operating profit of 229.7 billion yen (S$2.93 billion), far above the 189.6 billion yen average of analyst estimates compiled by Bloomberg. Nintendo now expects full-year Switch sales of 26.5 million units, having already surpassed its previous projection of 24 million. The company also boosted its forecast for operating profit by 24 per cent on the back of a surge in sales brought on by the coronavirus outbreak and hit game Animal Crossing: New Horizons. Shares rose as much as 2.2 per cent in Tokyo on Tuesday.

Soon to enter its fifth year on the market, the portable Switch sold 11.6 million units in the holiday period, up 7 per cent on a year earlier. Sales remained strong even after the holidays and Nintendo has sufficient components supply for now despite industrywide shortages, president Shuntaro Furukawa said. He added that his company doesn't plan to announce a new Switch model anytime soon, leaving the door open to new hardware later in the year.

Nintendo has stoked the gadget's popularity with customised limited editions, a cheaper Switch Lite and a series of blockbuster titles driving hardware sales. Its upgraded forecast for the remainder of the year is still deemed "way too low" by Hideki Yasuda, an analyst at Ace Research Institute, who projects the company's full-year tally will be closer to 28 million Switch units.

In 2020, Animal Crossing tapped into the need for soothing escapism during lockdowns and helped push software sales up 43 per cent to 176.1 million in the nine months ended December. The company's digital sales more than doubled in the same period and rose from 28.6 per cent to 40.9 per cent of all software sales.

"The Switch has turned from being a console to a lifestyle product 'tailor-made' for Covid-19 times, with Nintendo surfing on that wave," said Tokyo-based industry analyst Serkan Toto.

Nintendo shares outperformed console rivals Sony and Microsoft in 2020 and the new PlayStation 5 and Xbox Series X have faced production and logistics setbacks that have limited their availability. In response to those pricier and more powerful machines, Nintendo is planning an upgraded version of the Switch with the potential addition of 4K output, Bloomberg News has reported, tied to a slate of new game releases later this year. Those plans may yet be altered by component supply shortages across the electronics and auto industries.

Efforts to monetise its characters outside of software and hardware sales suffered a setback after the company postponed the debut of Super Nintendo World, located within the Universal Studios Japan theme park near Osaka, for a second time due to the pandemic.

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