Where did you get this impression. Please cite sources.
If something under-performs badly, they just stop doing it. Like every other rational company in the world.
"I think it sold lower than our expectations but on the other hand it was a really unique game." - Shigeru Miyamoto
They never said it was an outright failure, but this is a case where a big casual title fails to meet Nintendo's expectations with the company admitting as such.
Besides, as a publicly traded entity, Nintendo is obligated to be honest about the commercial performance and sales expectations of big releases. They have to make it clear to investors what they expect from a title, and how well its met those expectations.