Nintendo Forecasts 22.5% Net Profit Drop as Switch Sales Decline in Post-COVID Market

Nintendo, the renowned Japanese gaming giant, recently announced its financial results for the year ending in March 2023.

The results revealed that Nintendo is expecting its net profit to plummet by 22.5% to $2.79 billion, which is a wider drop than earlier forecasts.

Nikkei Asia tells us that this is largely due to the declining popularity of its Switch console, as changes in consumer behavior in the post-COVID era are making it harder for the Switch to remain consumers' first choice.

Inflation, Stronger Competition Impact Nintendo

In a press briefing, President Shuntaro Furukawa said, "Changes in consumer behavior due to inflation and more entertainment options in the post-COVID economic reopening is making it harder than in the past for Nintendo Switch consoles to be consumers' first choice."

The new net profit forecast is 30 billion yen lower than in November 2022. Since the yen has recently gained value, the company is also revising its exchange rate assumptions.

Nintendo had expected to sell 19 million Switch consoles this fiscal year, but it now expects to sell 18 million units. With 21 million units sold in the previous fiscal year, the Switch was a popular choice during the pandemic as people were forced to stay at home.

However, during the period of April through December 2022, the company saw a decline of 5.8% in its net income, while sales decreased by 1.9% to 1.295 trillion yen.

Meanwhile, as a result of a recent chip shortage the number of consoles sold during the nine months leading up to December 2022 dropped by 21.3%, to 14.91 million units, and production was hampered until late summer.

Back in August 2022, The Verge reported that sales of the Nintendo Switch Lite dropped by over 50% to 0.59 million units, while sales of the normal Nintendo Switch fell by 60% to 1.32 million units in the quarter.

Nintendo's Answer

Amid underwhelming results, Nintendo stated that its procurement of semiconductor parts and other materials had improved since September, with production returning to normal levels in October. Furukawa has said that the company doesn't have to worry about getting parts for the next fiscal year or later.

In an effort to attract new talent, Nintendo also announced that it will be raising the salaries of its employees in April, with base salaries increasing by 10%. The company hopes that this will make it more appealing to people who might want to work there.

"We expect that various companies will raise wages against the backdrop of high prices," Nintendo's Furukawa said.

Nintendo is facing challenges in the current market as consumer behavior changes and more entertainment options become available.

The company's financial results show that its net profit and Switch console sales have gone down, but it is trying to stay competitive by raising employee salaries and getting better at buying parts.

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