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Nintendo cuts annual sales and profit outlook as Switch struggles

Nintendo Co. has a big change in its financial perspective to accommodate the declining demand for the old Switch console. The Kyoto-based video game maker said it had reported a profit decline of 60% for the first half of its fiscal year, which calls for a change in strategy.

However, the company reduced its expectation of operating profit by as much as 10 percent to ¥360 billion ($2.4 billion) for the fiscal year as it predicts sales of just 12.5 million units of Switch against estimates of 13.5 million units. This is highly unusual because gaming companies commonly adhere to the guidance once an important holiday shopping season opens.

The financial statement of Nintendo reported a profit of 108.7 billion yen or $715 million over the April to September period. This is a loss of 34% to its sales from the past year that amounts to 523 billion yen, or $3.4 billion. Additionally, of that amount, more than 74% originated from the company's overseas markets.

The Switch console's worldwide sales had declined to 4.7 million units from 6.8 million in the previous year. However, Nintendo still aims for one Switch per person rather than one per household.

Despite the decline, Nintendo still holds on to its profit forecast for the full fiscal year ending March 2025 to be at 300 billion yen or $2 billion. This is almost a 29% decline compared to the previous fiscal year. Annual sales are estimated to decline by 23% to 1.28 trillion yen or $8.4 billion.

Nintendo usually makes the most money during the Christmas shopping season and the New Year's holiday, when children receive cash gifts from relatives. The company has not yet made any announcement about a successor to the Switch, which has been a major concern for consumers.

Among the major titles in the half, "Paper Mario RPG" sold 1.95 million copies since its May launch and "Luigi Mansion 2 HD" reached 1.6 million sales. In total, Switch games sold more than 70 million during this half, with nine titles gaining million-seller status among them, which included third-party developers' products.

During the previous fiscal year, a Super Mario Brothers movie had boosted sales. In the absence of a similar release this fiscal year, the results have been hit. Nintendo also reported a decline in revenue from mobile games and other intellectual property-related businesses.

It is during this period that Nintendo should seek innovative changes to the market. These are critical product announcements and updates to resume the momentum in sales and restore consumers' confidence in the brand.