Higher online sales boost Nintendo profits

NINTENDO posted quarterly profit that topped estimates, as higher software sales online made up for weaker shipments of the Switch console.

Operating profit was ¥30.5 billion (R3.58bn) in the June quarter, compared with analysts’ average projection for ¥25.6bn. Revenue was ¥168bn, short of the average projection for ¥186.9bn. The company maintained its fullyear forecasts for profit, hardware and software sales.

The strong results are the latest twist for Nintendo, which has gone from one of Japan’s hottest stocks to a target for short-sellers – wiping out all its gains in the past year. But with Switch software and hardware shipments holding up, it gives new President Shuntaro Furukawa the chance to focus on the launch of its highly-anticipated online game service in September.

“The market is pricing an earnings decline from here on, but the only way that happens is if the Switch starts to decline sharply and it never sees growth again,” said Atul Goyal, an analyst at Jefferies Group.

Nintendo sold 18 million Switch titles, up from 8.1 million last year, as more people downloaded games from the company’s more profitable online store. Switch owners on average each bought 0.9 titles during the quarter, down from 1.7 titles last year. It sold 1.9 million Switch hardware units in the June quarter.

Nintendo sold 1.4 million Labo units during the quarter, meaning just 7 percent of Switch owners bought the new cardboard products.

Revenue from smartphone games was ¥9.1bn in the quarter, unchanged from a year earlier.

The company has yet to provide a release date for its mobile racing game Mario Kart Tour. – Bloomberg