Nintendo seen extending profit streak as housebound consumers switch on

TOKYO (Reuters) – Japan’s Nintendo Co Ltd (7974.T) is expected to extend its decade-high earnings streak when it reports fourth-quarter results next week, powered by the hit Switch console which is expanding its reach among locked-down consumers.

FILE PHOTO: The logo of the Nintendo is displayed at Nintendo Tokyo, Nintendo’s first official store in Japan, at SHIBUYA PARCO department store and shopping mall complex, Nov. 19, 2019. REUTERS/Issei Kato/File Photo

Nintendo is seen posting an 80% jump in operating profit on May 7 to 54 billion yen (405.5 million pounds) for the January-to-March quarter, according to an average of 10 analyst estimates in a Refinitiv poll – a fourth-quarter profit level last seen in the heyday of the Wii console.

The earnings will provide official figures for the first 12 days of sales of island life simulator Animal Crossing: New Horizons, which has proved a global hit as it draws in casual gamers stuck at home due to the coronavirus outbreak.

The virus is proving a boon for home entertainment but is stretching Nintendo’s lean supply chain, exacerbating shortages of the hybrid home-portable Switch device, the handheld-only Switch Lite variant and hard copies of games.

Nintendo “could sell multiples of what is in the inventory at the moment”, said Serkan Toto, founder of game industry consultancy Kantan Games.

In addition to the hardware supply constraints, Nintendo has offered few details on upcoming titles leaving an unusually bare launch slate that risks holding back sales momentum in the current financial year.

The coronavirus outbreak is hobbling games development around the world, with release dates for major titles for rival Sony Corp’s (6758.T) Playstation 4 pushed back.

Sony and Microsoft Corp (MSFT.O) plan to launch next generation games consoles by year-end, providing fresh competition for the Switch in its fourth year on the market.

Nintendo sees 19.5 million Switch hardware units sold in the year ended March, a figure widely seen as the latest example of the firm’s traditionally conservative forecasts – it had already sold almost 18 million units by the end of December.

The popularity of Animal Crossing, a key beachhead in Nintendo’s efforts to drive console penetration beyond hardcore gamers, has helped lift the company’s shares almost 40% from their mid-March trough where they had sank following concern over future growth drivers.

Activist firm ValueAct Capital Partners took a $1.1 billion stake in April arguing Nintendo can broaden its audience – echoing long-held investor frustration over the company’s reticence to embrace alternative outlets for its popular roster of characters.

Expansion to mobile, which could help offset the cyclical console business, has undershot the company’s own guidance on title launch numbers, with a highly anticipated smartphone version of marquee series Mario Kart underperforming, hobbled by the initial lack of a multiplayer option.

Reporting by Sam Nussey; Editing by Christopher Cushing

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