As expected Nintendo has begun the roll-out of its financial reports, so far in the form of the formal documentation outlining sales and profit margins. In the coming days we should see manuscripts of President Tatsumi Kimishima's presentation and an investor Q & A. For now, however, we have a set of results that shows the company on a Switch and Pokémon-led return to more solid profits.
Overall Nintendo has beaten its own previous projections for the 2016 / 2017 financial year, reporting higher than expected figures for net sales, operating profit and ordinary profit. The operating profit increase - truly the core figure reflecting the company's current levels of success - is attributed to the projections-busting Nintendo Switch sales, with the big N citing high sales and lower-than-expected marketing costs as a result of the natural demand for the system.
So, let's get to the nuts and bolts of the financial figures, covering 1st April 2016 to 31st March 2017 - we have a sizeable net income profit of 102,574 million Yen, which amounts to around $920 million / £715 million / €840 million, up 521.5% on the previous year. That may seem extraordinary, but to be clear there are external and one-time factors bloating that figure - Nintendo's share of Pokémon GO's monster profits are a factor, and more tellingly the company's one-off sale of its majority stake in the Seattle Mariners baseball team. So while that profit figure is terrific news for Nintendo its sheer size doesn't reflect the realities of its day-to-day business, even though the company is doing well.
More importantly, perhaps, net sales beat previous estimates, with the Switch credited for its role. Net sales were still down overall, with the 3DS doing reasonably but the Wii U largely flatlining, coming in 3% below the previous year's results.
The core business of making and selling products also brought a better-than-expected operating profit of 29,362 million Yen (it had been previously projected at 20,000 million Yen), which is roughly $264 million / £205 million / €242 million; despite beating Nintendo's own projection this was still down 10.7% on the previous year.
The financial report says the following regarding these figures, providing sales updates on key releases:
Nintendo Switch, a new home console system that diversifies the ways you can play games, launched during this period on March 3 worldwide and is off to a promising start. In particular, The Legend of Zelda: Breath of the Wild has won immense popularity with recorded sales of 2.76 million units (the total units sold including the Wii U version is 3.84 million units) and 1-2-Switch has been generating buzz. Both of these games were released at the same time as the hardware. The sales volume for hardware and software during this period reached 2.74 million units and 5.46 million units respectively.
Sales volume for the Nintendo 3DS software also grew favorably. In addition to Pokémon Sun and Pokémon Moon, which released worldwide in November and generated a tremendous amount of buzz with recorded sales of 15.44 million units, Super Mario Maker for Nintendo 3DS sold 2.34 million units and Kirby: Planet Robobot sold 1.36 million units. The release of the smart device application Pokémon GO led to increased sales of software in the Pokémon series and drove the Nintendo 3DS family hardware sales growth outside of Japan. The worldwide sales volume for the Nintendo 3DS hardware this period was 7.27 million units (7% increase on a year-on-year basis), while the Nintendo 3DS software sales volume reached 55.08 million units (14% increase on a year-on-year basis).
For Wii U, while The Legend of Zelda: Breath of the Wild released worldwide in March and reached sales of 1.08 million units, the Wii U software sales volume during this period was 14.8 million units (46% decrease on a year-on-year basis) and hardware sales were in alignment with our expectations at the start of the fiscal year, decreasing to a sales volume of 760 thousand units (77% decrease on a year-on-year basis).
On the smart device front, we released Super Mario Run, a new action game application featuring Mario, in December for the iOS and March for the Android. This title elicited a fantastic response from consumers worldwide. Furthermore, we released Fire Emblem Heroes, a full-fledged simulation RPG game application that can be enjoyed casually on smart devices, in February. The game is being enjoyed by both long-time fans of the Fire Emblem series and consumers who have never played the series on dedicated video game systems.
The Nintendo Entertainment System: NES Classic Edition also launched in Japan and overseas in November to widespread popularity. Although the release of some new titles offering amiibo functionality restored some momentum, amiibo sales remained limited to 9.1 million units for figure-type and 9.3 million units for card-type. In addition, there were relatively fewer offerings of downloadable content during this period, so digital sales were also down to a large extent on the same period last year.
In terms of the coming year — 1st April 2017 to 31st March 2018 — Nintendo estimates improvements in profits. Net sales is the big gain, projected at 750,000 million Yen, a hefty 53.3% increase that would take the company's sales back towards the levels enjoyed in the late Wii / DS period. That's evidently driven by a combination of Switch success, ongoing 3DS momentum and potentially surprises yet to be revealed. Operating profit (which reflects the core success of making and selling products) is also expected to jump by 121.4%, with a projection of 65,000 million Yen. The only number to drop is the total profit, down 56.1%; as highlighted above this will be due to the last year's figures being heavily inflated by income such as the Seattle Mariners sale.
Moving on to hardware and software sales, as previously reported Nintendo beat its original Switch system projections and also had a solid year with the 3DS. Wii U sales were low as expected, and due to the system's discontinuation Nintendo doesn't expect to ship any of the consoles in the coming financial year.
Figures are below.
Hardware Sales (financial year) — 2.74 million units
Hardware Sales (life to date) — 2.74 million units
Hardware Sales Projection (2017 to 2018) — 10 million units
Software Sales (financial year) — 5.46 million units
Software Sales Projection (2017 to 2018) — 35 million units
Hardware Sales (financial year) — 7.27 million units
Hardware Sales (life to date) — 66.12 million units
Hardware Sales Projection (2017 to 2018) — 6 million units
Software Sales (financial year) — 55.08 million units
Software Sales Projection (2017 to 2018) — 40 million units
Hardware Sales (financial year) — 760,000 units
Hardware Sales (life to date) — 13.56 million units
Hardware Sales Projection (2017 to 2018) — not applicable (discontinued)
Software Sales (financial year) — 14.8 million units
Software Sales Projection (2017 to 2018) — 3 million units
Those are decent projections for the 3DS, we'd suggest, and the fact that more 3DS games are expected to sell than the equivalent Switch figure indicates that Nintendo has plans to boost that area. For its first full year the Switch estimates also seem solid (remember software is relative to a growing userbase), though Nintendo's estimate of shipping 10 million hardware units is relatively conservative in comparison to figures thrown around by analysts in recent weeks.
We'll provide more detailed coverage throughout the day, but let us know what you think of these figures in the comments below. Are you optimistic for the year ahead?