Pokemon too late for Nintendo losses

Posted by Kirstie Brown in Personal Finance on 27 July 2016 - Kirstie is a Senior Credit Analyst at checkmyfile.

Japanese video game group Nintendo has reported a 39 billion yen (£280m) loss as they release figures for the quarter ending on the 30th June 2016. Despite owning a stake in the hugely popular Pokémon Go which has reinvigorated the Pokémon franchise, this success has come too late to prevent a substantial loss for the company. Net sales were cited as $587m which represents a 31% decline in comparison to 2015, when it reported sales of $855m.

Nintendo attributed its massive operating loss partly to a stronger Japanese yen, the appreciation of which caused exchange losses of 35 billion yen. Poor hardware performance also contributed to the troubles experienced by the firm this quarter. The Wii U console sold just 220,000 units worldwide resulting in a 53% year-over-year drop. This means that the company sold less than half as many of these consoles as in the same period a year ago.

Since its release, the total number of these consoles sold is just over 13m, compared with more than 100m for its predecessor, the Nintendo Wii. Software for the Wii U remained fairly flat with 4.6m units being reported for the 2016 period – an increase of 0.1 million from the previous year. Meanwhile, sales for the handheld 3DS dropped by 7% to 940,000 units, however the software fared a little better having risen 7% to 8.5m units off the back of games such as Kirby: Planet Robobot and Fire Emblem Fates: Birthright/Conquest.

Investor focus on the gaming company has been heavy in recent weeks with the recent release of Pokémon Go, with shares having more than doubled since the app was released. Nintendo, a Kyoto based company which has created famed video game characters such as Mario, has seen shares rocket since the app was launched in the U.S., Australia and New Zealand on the 6th July. However, they have re-iterated their message from last week, saying that it wasn’t adjusting its forecast for its current fiscal year even with the success of Pokémon Go. Nintendo currently owns a 32% stake in the Pokémon Company which licenses the franchise, and 13% of Niantic, the game’s developer. Nintendo are behind the Pokémon Go Plus accessory, which will let players know when they have encountered a Pokémon without having to constantly look at their phone, however the device has been delayed until September, which means running a risk of missing out on the current hype surrounding the game.

Despite the poor results so far this year, Nintendo remain confident about the future. The company is pinning its future on the Nintendo NX, the codename for a mysterious new console which is due to be released in March 2017, as well as continuing to develop its own smartphone games. As a gaming sector veteran, Nintendo have been hurt by the rise of smartphones which has caused many gamers to switch from traditional consoles to cheaper, and often free, mobile alternatives. With the scheduled release of the Pokémon Go Plus in September, as well as Pokémon Sun and Moon in November this year, Nintendo are banking on a big second half for its fiscal year.

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