Nintendo Switch Sale Weakness Affects Its Q1 Topline; Reiterates Weak FY22 Outlook

Nintendo Co Ltd NTDOY reported a first-quarter FY22 net sales decline of 9.9% year-on-year to ¥322.6 billion. 

Dedicated video game platform sales declined 10.3% Y/Y to ¥308.9 billion. Mobile, IP-related income sales reduced 0.6% Y/Y to ¥13.1 billion. Playing cards, etc., sales rose 72.6% Y/Y to ¥0.5 billion.

Hardware: Unit sales for the entire Nintendo Switch family of systems declined by 21.7% Y/Y to 4.45 million units. Nintendo Switch sales increased 8.3% Y/Y to 3.31 million units. Nintendo Switch Lite sales reduced 56.7% Y/Y to 1.14 million units.

Software: Software sales decreased 10.2% Y/Y to 45.29 million units. Digital sales declined 24.9% Y/Y to ¥75.9 billion. In comparison, its peer Sony Group Corp SONY clocked 15% Y/Y growth in Q1 revenue.

Profit: The gross profit decreased 8.8% Y/Y to ¥192.8 billion due to lower sales. The gross margin expanded 70 bps to 59.8%, mainly due to the weak yen, even though the ratio of digital and first-party software sales to total software sales decreased.

The operating profit declined 17.3% Y/Y to ¥119.7 billion. The operating margin contracted 330 bps to 37.1% due to the gross profit decline and higher SG&A.

The net profit reduced 12.9% Y/Y to ¥92.7 billion, and the net margin declined 100 bps to 28.7%. Nintendo posted an EPS of ¥778.59.

Outlook: Nintendo reiterated its FY22 guidance of net sales of ¥1.6 trillion, representing a 9% Y/Y decline. It sees FY22 Nintendo Switch Hardware decline of 11.5% Y/Y to 25.5 million units. It considers a Nintendo Switch Software decline of 17.7% Y/Y to 190 million units.

The videogame maker forecasts an FY22 operating profit of ¥500 billion, implying a 22% Y/Y decline and a net profit of ¥340 billion, signifying a 29.2% Y/Y decrease.

Nintendo cut the FY22 dividend forecast by 35.6% Y/Y to ¥1,430. It held ¥1.1 trillion in cash and equivalents.

Price action: NTDOY shares closed lower by 1.59% at $63.81 on Wednesday.