Expectations - Wall Street Journal
Struggling videogame console maker Nintendo is expected to report a smaller operating loss in its fiscal first quarter on Wednesday, thanks to a boost in hardware sales from the launch of the newest installment of its popular racing game, “Mario Kart 8.”
Attention is on any indication from Nintendo on how much growth it sees in its foray into toys-as-video-game-tools with its Amiibo figurines, to coincide with the launch of popular franchise “Super Smash Bros.” this fall. If Nintendo can make Amiibo as successful as Activision Publishing’s Skylanders or Disney DIS -1.09% Infinity franchises, it could help Nintendo attain a strong profit. The company booked losses on its hardware units and wrote down its Wii U and 3DS inventory in March, and that, along with cost cuts, will help its earnings this year, analysts say. Nintendo posted its third straight year of losses in the year ended March.
Long-term growth, however, will hinge on Nintendo games’ ability to attract new users to the Wii U as potential users spend more time on their smartphones and tablets, and on its ability to cultivate new revenue streams. Eyes are on any new details on Nintendo’s expected entrance into the non-wearable healthcare business, which the company has said will begin operations in the financial year starting April next year, its plans to expand into the rest of Asia, and any updates about Nintendo President Satoru Iwata’s recovery from surgery.
Analysts on average expect an operating profit of 25 billion yen ($245 million) for the year through next March, according to a poll of 19 analysts by Thomson Reuters. That’s up from an operating loss of Y46.4 billion a year ago but it would be only half the profit the company forecast in May. Revenue is expected to remain largely flat at Y559 billion, compared with Y571.7 billion in the previous year.
Here are the key issues to watch:
The company in May said that it expects Wii U sales to hit 3.6 million consoles in the year to March, up from 2.72 million last year, with Nintendo 3DS sales forecast to hit 12 million units, on par with 12.24 million in the previous year.
“Mario Kart 8” appears to have helped Wii U sales. But a single game title alone won’t help fix Nintendo’s problems. Focus has now shifted to the ability of fighting game “Super Smash Bros.” and “Hyrule Warriors” – an action video game set with characters from Nintendo’s popular “Zelda” franchise – to sustain momentum. One concern is whether the handheld 3DS will be able to turn around sluggish sales. Sales of the handheld dropped below one million in the January-March quarter, and some analysts say that Nintendo’s 3DS target is unrealistic.
In January, Nintendo President Satoru Iwata promised more details during the summer on a new push into “quality of life” business, to begin in the next financial year. Iwata said there were opportunities for Nintendo to use its ability to make taking care of oneself fun, but only gave one hint: that it won’t be a wearable device. He also said that the company will promote its hardware in emerging markets. Are there any delays in these initiatives?
Nintendo will launch about 10 figures, starting with figurines compatible with “Super Smash Bros.” for the Wii U, and will release more during the holiday season for “Mario Kart 8”,” Mario Party 10” and other games. The move taps an $80 billion global toy industry. How big will the appeal of the figurines as collectibles be, and will the toys become a driver of growth?