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Media & Entertainment

Nintendo is at the top of its game with 41% rise in profit

Gaming giant logs $3bn in operating profit as Switch sales surge

Nintendo has been a rare beneficiary during the coronavirus outbreak with the Switch console and game softwares like "Animal Crossing: New Horizons" experiencing a surge in demand. (Source photo by Nintendo)

TOKYO -- Video game maker Nintendo announced a 41% surge in operating profits for the fiscal year ending March 2020, as Switch consoles and games such as Animal Crossing: New Horizons proved popular with consumers forced to stay at home during the coronavirus crisis.

The Kyoto-based gaming giant's operating profit rose to 352 billion yen ($3.3 billion) compared to 249 billion yen last year, with a 9% jump in revenue to 1.3 trillion yen. Net profit totaled 258 billion yen, up 33% for the year.

Nintendo has been a rare beneficiary since the coronavirus outbreak with homebound consumers eager to purchase the Switch video game console to escape boredom. Nintendo sold 21 million units of the console in the year ending March 31, surpassing Nintendo's January estimate of 19.5 million.

Released in 2017, overwhelming demand for the Switch console, as well as steady sales in its handheld-only Switch Lite systems, have once again proved Nintendo's enduring strength as a global brand.

Along with its hardware, popular software games also boosted Nintendo's earnings, particularly the latest in its Animal Crossing game series which was released on March 20, and has gone on to become a massive hit, already selling over 11 million copies.

In the game, users live on an uninhabited island where they try to develop a society by building shops and other accommodations. It also provides gamers with the opportunity to connect with people by "flying" to friends' islands, which has struck a chord with people stuck inside their homes during the pandemic.

Hirokazu Hamamura, the former chief editor of Japanese gaming magazine Famitsu and now a senior adviser to the board at media conglomerate Kadokawa Corporation, said the game "has become a place for communication and interaction with other people, which is something many are craving right now."

Other software games like "Pokemon Sword" and "Pokemon Shield," as well as "Ring Fit Adventure" also experienced steady sales.

Nintendo said 27 game titles had reached a million in sales during the 2019 fiscal year.

Meanwhile, the gaming giant expects a tough year ahead, with its operating profit for the year ending March 2021 expected to fall 15% to 300 billion yen, and revenue expected to fall 8% to 1.2 trillion yen.

Nintendo said the less optimistic outlook was based on a lower sales forecast for the Switch console, which the company expects to slip 10% to 19 million units. Nintnedo also blamed the rising yen as another reason for lower than expected earnings.

The disappointing forecast was below analysts' estimates.

As of May 1, a QUICK consensus survey, which tallies market analysts' forecasts, projected that Nintendo would post an operating profit of 367 billion yen for the current fiscal year.

Still, Hideki Yasuda, an analyst at Ace Research Institute, said Nintendo's estimates are "pretty conservative."

"I think Nintendo's forecast is based on a scenario where the coronavirus comes to an end rather quickly," Yasuda said.

"Switch is experiencing explosive demand globally which could continue for a while, and its strength in developing children-friendly game content will also lead to strong software sales too," he said. "I believe Nintendo played it safe."

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