Nintendo sticks to its annual sales forecast as Q1 operating profit drops 70% year-on-year

Nintendo says its sales forecast for the financial year hasn’t changed, despite reporting a 70% year-on-year drop in operating profit in Q1.

The company’s latest financial results, which cover the period of April to June 2024, report an operating profit of ¥54.5 billion ($366 million), which is down 70.6% compared to the same period last year.

Nintendo says the drop is due to “the decline in gross profit” and the rise in SG&A (selling, general and administrative) expenses.

Most notably, it points out that net sales from its video game business dropped 46.4% year on year, mainly because last year’s Q1 included the release of The Legend of Zelda: Tears of the Kingdom.

While the latest Q1 period saw two more million-sellers in Paper Mario: The Thousand Year Door (1.76 million sold) and Luigi’s Mansion 2 HD (1.19 million sold), it couldn’t compete with last year’s Tears of the Kingdom, which sold more than 10 million copies in its first three days alone.

A similar drop was seen in its mobile and IP-related business, where Q1 sales decreased 53.8% year-on-year, due to the release of The Super Mario Bros Movie last year.

“During the first quarter of the previous fiscal year, unit sales of both hardware and software were extremely high for a first quarter, when The Super Mario Bros Movie energised our dedicated video game platform business and The Legend of Zelda: Tears of the Kingdom was released, together with specially designed hardware based on that title,” Nintendo explained in a statement

“There were no such special factors in the first quarter of this fiscal year, and with Nintendo Switch now in its eighth year since launch, unit sales of both hardware and software decreased significantly year-on-year.”

Despite the drop, Nintendo says it hasn’t changed its forecast for the entire financial year, and still expects to sell a total of 13.5 million Switch consoles between April 2024 and March 2025 (in Q1 it sold 2.1 million).

Reacting to the financial results, Morningstar Investment director Kazunori Ito told Bloomberg that the drop in profits were indicative of a quieter Q1 for Nintendo this year.

“The hardware shipments are in line with the dearth of big-name software offerings,” he explained. “The market was too optimistic. The rise in selling, general and administrative expenses due to the weak yen was a negative surprise.”

Tokyo-based analyst Serkan Toto also told Bloomberg that he would be surprised if Nintendo does indeed manage to sell 13.5 million Switch consoles by the end of the financial year.

“I really wonder how Nintendo wants to achieve their hardware sales target,” Toto said. “I am sceptical if Nintendo still has enough fuel in the tank, especially if they plan to get to the target without hardware price reductions.”