Nintendo released its second quarter financial statements today for FY 2019. The reporting period is from April 1, 2018 through September 30, 2018. Net sales came in at 388.9 billion yen (up 4% year-on-year) and operating profit was 61.4 billion yen (up 53.7% year-on-year). Foreign exchange gains netted Nintendo an additional 21 billion yen, for a total ordinary profit of 91.9 billion yen (up 32.1% year-on-year).
As far as hardware and software is concerned, Nintendo has performed pretty well, but they do have some hurdles to jump if they are to meet their forecasts. For the six month reporting period they sold 5.07 million Nintendo Switch systems (up 3.7% year-on-year), bringing the lifetime sales to 22.86 million. Nintendo has forecast selling 20 million systems during its fiscal year. Here we are six months in and it has only managed to shift 1/4 of its goal. It’s not total doom and gloom, however, because we must remember that the last six months are typically the slowest of the year for video game sales. Nintendo usually does the majority of its system sales during the holiday shopping period, which will take place over the next three months. Software releases like Super Mario Party (Oct. 2), Pokémon Let’s Go Eevee/Pikachu (Nov. 16), and Super Smash Bros. Ultimate (Dec. 7) should shift hardware. Other than New Super Mario Bros. U Deluxe, we’re unsure of what’s in the wings for 1st quarter of 2019, but maybe another major title will contribute to the lofty 20 million hardware sold goal.
Switch software is off to a better start with 42.13 million pieces selling in the first six months (up 91.3% year-on-year). Nintendo has forecasted 100 million for the entire fiscal year and this is probably doable given that its two biggest games of the year (Pokémon and Smash) have yet to arrive. As more Switch systems sell for the holidays, sales of evergreen titles like Mario Kart 8 Deluxe, Super Mario Odyssey, and The Legend of Zelda: Breath of the Wild are expected to continue to perform well.
Nintendo 3DS has sold through 1 million systems for the first half of the year (down 65.1% year-on-year), with a forecast of 4 million. Just like the Switch it’s only 25% of the way to its goal. It’s difficult to say if Nintendo can hit 4 million since most of its marketing and effort has shifted to the Switch. Perhaps if there are some major discounts for Black Friday and throughout the holiday shopping season they could manage to approach that number. With no new releases scheduled for the rest of the year (Luigi’s Mansion just released and will be reported in the next quarterly financials), and dwindling support across the board, this will most likely be the last hurrah for the category. Total software sales for the 3DS is down 54.6% year-on-year.
Other sectors contributing to Nintendo’s bottom line include its classic line of systems (NES Classic Edition and SNES Classic Edition). They managed to sell 3.69 million in the last six months. Digital software sales grew 71.7% over last year to $39.1 billion yen. Its smart device games are continuing to bring in the money ($18.7 billion yen) with a 4.7% increase year-on-year.
Overall Nintendo seems to be doing well, but the momentum around the Switch seems to have trailed off a little bit. Early talk of it selling more than the Wii has all but stopped and going into the competitive holiday season without any sort of price reduction (as of press time) could put a damper on system sales. Remember that last year both Sony and Microsoft heavily discounted their consoles (some as low as $199 and packed with a game) to drive sales. Instead Nintendo is still taking the approach of including games in the system bundles (Smash, Pokémon, Diablo III bundles for the holiday season), but instead of keeping the price at $299, they’ve increased it by $60, so there’s no real incentive for them to sell, other than to hardcore fans that really want the small cosmetic differences. We still haven’t seen any Black Friday ad leaks for Switch, so it’s possible they might have some discounts in the works, but if they don’t we’re not sure Pokémon and Smash have enough clout for Nintendo to sell 20 million Switches this fiscal year. We shall soon find out!