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Nintendo's profits soar, but analysts fear slowdown on the horizon
Fri, 8th May 2020
FYI, this story is more than a year old

Nintendo has posted strong financial results for the financial year ending March 31 2020, boosted by the popularity of Animal Crossing: New Horizons released on March 20 this year.

Here are the highlights of the results (all converted from the original yen in the report to USD):

Operating profit for the financial year ending 31 March was $3.3 billion, increasing 41% year-on-year, representing the largest increase of operating profit in nine years.

Net sales, helped by the Animal Crossing title which sold 13 million units in its first six weeks, were $12.3 billion for the financial year, a 9% increase year-on-year.

Profit per share for the financial year was $20.40, a 34% increase from $15.18 in the prior-year period.

Cash and cash equivalents were $5.8 billion for the end of the financial year, up from $5.5 billion in the prior-year period.

While the statistics look good for the gaming company, some analysts believe its numbers will drop as the current quarter progresses due to strains related to the COVID-19 pandemic.

“While Nintendo's results for the three months to the end of March were good, its outlook is uncertain because of delays to software development and console production,” says GlobalData senior analyst for thematic research Rupantar Guha.

“This uncertainty is reflected in its position in the middle of GlobalData's gaming software thematic scorecard, which places it behind leading companies such as Tencent, Epic Games and Activision Blizzard.

GlobalData's scorecard ranks Nintendo 17th out of 38 companies in the scorecard, with a rating of only two out of five for the company's ability to cope with the challenges brought by COVID-19.

“This rating suggests that the virus is expected to have a negative impact on the company's earnings over the next 12 months,” says Guha.

“Nintendo is facing production issues for its Switch consoles that have forced it to halt domestic shipments.

Factory shutdowns in China due to the pandemic caused serious supply issues for the manufacturing of Nintendo's Switch console, triggering component shortages which in turn slowed output in its primary manufacturing facility in Vietnam.

Despite this, Nintendo expects to sell 19 million of its Switch consoles between April 2020 and March 2021. But Guha believes the actual number will turn out to be lower.

“This guidance is conservative given the rising market demand and reflects the company's inability to predict with any degree of confidence when production will be back on track.