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Nintendo has warned investors that it expects to see an operating loss of ¥35B ($336M) for the fiscal year ending March 31, 2014. The firm had previously forecast a profit of ¥100B.
The dramatic profit to loss turnaround is a result of much lower than expected sales of the 3DS and Wii U systems, Nintendo says.
Despite being clear for the world to see that the Wii U was struggling and would never meet its 9 million sales forecast, Nintendo had remained steadfast that this target would be met. However, the firm has now admitted that it was totally wrong, slashing its sales forecast from 9 million to a maximum of 2.8 million units.
It’s a similar story for 3DS, which has seen its sales forecast slashed from 18 million to only 13.5 million.
“As year-end sales constitute an extremely high proportion of the annual sales volume in the video game industry and the annual financial performance of a video game company rests heavily on its performance in the year-end sales season, we put in place various promotional activities in order to promote sales and expand our audience in the year-end sales season of the previous calendar year,” said Nintendo president Satoru Iwata.
“However, it is now expected that our sales will fail to meet our previous forecast by a large margin.”
He continued: “Wii U sales, on the other hand, showed some progress in the year-end sales season as we released various compelling titles from the summer onwards, launched hardware bundles at affordable price points and also performed a markdown of the hardware in the U.S. and European markets; however, they fell short of our targeted recovery by a large margin.
“In particular, sales in the U.S. and European markets in which we entered the year-end sales season with a hardware markdown were significantly lower than our original forecasts, with both hardware and software sales experiencing a huge gap from their targets.
“In addition, we did not assume at the beginning of the fiscal year that we would perform a markdown for the Wii U hardware in the U.S. and European markets. This was also one of the reasons for lower sales and profit estimates.”
The challenge for Nintendo is figuring out how it can turn around what has been a disastrous launch for the Wii U. Whether that means a big price cut and a big change in marketing strategy isn’t clear.
Source: Press release
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