Nintendo Reports Financial Losses As Expected, Along With Modest Wii U Sales Targets
Posted by Thomas Whitehead
Only 3.6 million Wii U hardware sales expected in the current year
Nintendo has today revealed its financial results for the 2013 / 2014 year, which unsurprisingly bring losses as projected by the company in its Q3 report. Losses are higher and sales are down on those estimates, however, pointing to a difficult Q4 for the company, while there are some eye-opening and low Wii U sales projections.
To begin with the nuts and bolts of the financial figures — covering 1st April 2013 to 31st March 2014 — we have a net income loss of over 23.2 billion Yen, which amounts to around $229 million / £135 million / €164 million. The core business of making and selling products brings us to an operating loss of 46.4 billion Yen, which is roughly $457 million / £269 million / €328 million; this is a fair leap over the estimated 35 billion Yen operating loss projected in January. The financial report says the following regarding the figures.
The “Wii U” hardware still has a negative impact on Nintendo’s profits owing mainly to its markdown in the United States and Europe, and unit sales of software, which has high profit margins, did not grow sufficiently, leading to a gross profit of 163.2 billion yen. Total selling, general and administrative expenses exceeded gross profit, resulting in an operating loss of 46.4 billion yen. Also, due to depreciation of the yen at the end of this period compared with the one at the end of the last fiscal year, exchange gains totalled 39.2 billion yen, leading to an ordinary income of 6.0 billion yen. On the other hand, mainly due to the balance of deferred tax assets reduced in relation to the losses carried over in the United States, there is a net loss of 23.2 billion yen
In terms of the coming year — 1st April 2014 to 31st March 2015 — Nintendo estimates a return to profit: a 3.2% increase is expected in net sales, with an operating profit of 40 billion Yen, around $394 million / £232 million / €283 million, and a net income profit of 20 billion Yen, roughly $197 million / £116 million / €141 million. The strategies outlined match those given earlier this year, such as boosting IP licensing, expanding the appeal of the Wii U GamePad, and revealing a new health-focused QOL platform in the financial year.
Moving on to hardware and software sales, there was a positive tone around the 3DS results, reflecting the fact it remains the profit driver for the company, with sales of Pokémon X & Y standing out. The Wii U results are far less positive, as the console "as a whole showed slow growth" and struggled to make an impact.
Also of note are the hardware sales projections for the coming year, which are worryingly low for the Wii U. Figures are below.
Hardware Sales (financial year) — 2.72 million units
Hardware Sales (life to date) — 6.17 million units
Hardware Sales Projection (2014 to 2015) — 3.6 million units
Software Sales (financial year) - 18.86 million units
Hardware Sales (financial year) — 12.24 million units
Hardware Sales (life to date) — 43.33 million units
Hardware Sales Projection (2014 to 2015) — 12 million units
Software Sales (financial year) — 67.89 million units
Hardware Sales (financial year) — 1.22 million units
Hardware Sales (life to date) — 101.6 million units
Hardware Sales Projection (2014 to 2015) — 0.5 million units
Software Sales (financial year) — 26.16 million units
Hardware Sales (financial year) — 0.133 million units
Hardware Sales (life to date) — 153.99 million units
Hardware Sales Projection (2014 to 2015) — none given
Software Sales (financial year) — 10.29 million units
Some notable figures are the projection of another solid year for the 3DS — 2.2 million 2DS units were sold in the last financial year — along with similar software numbers that are expected. Wii U software was outsold by its Wii contemporaries, and Nintendo's low projection of 3.6 million Wii U hardware sales is surprising, while just 20 million software sales are expected, a minor increase over the year we've just had. This is perhaps surprising in light of upcoming releases such as Mario Kart 8 and Super Smash Bros., in particular, and it's a concern that if these targets are met the system will have still sold less than ten million lifetime units when next year's report is issued.
We'll provide more detailed coverage throughout the day, but let us know what you think of these figures in the comments below. What do you think of the profit projection, and of those low Wii U targets?