Nintendo raises outlook after surpassing high expectations

Nintendo Co. raised its annual forecasts a second time after continued momentum for the Switch console helped the company to its best quarterly earnings since 2008.

The Kyoto-based games company reported operating profit of 229.7 billion yen ($2.2 billion), far above the 189.6 billion yen average of analyst estimates compiled by Bloomberg. Nintendo now expects full-year Switch sales of 26.5 million units, having already surpassed its previous projection of 24 million. The company also boosted its forecast for operating profit by 24% on the back of a surge in sales brought on by the coronavirus outbreak and hit game Animal Crossing: New Horizons.

Soon to enter its fifth year on the market, the portable Switch sold 11.6 million units in the holiday period, up 7% on a year earlier. Sales remained strong even after the holidays and Nintendo has sufficient components supply for now despite industrywide shortages, President Shuntaro Furukawa said. He added that his company doesn’t plan to announce a new Switch model anytime soon, leaving the door open to new hardware later in the year.

“Without a Switch Pro and suite of new games such as a sequel to Zelda Breath of the Wild, Nintendo’s 2020 will mark the high watermark as the Switch cycle wanes and with a difficult year-ago comparable as 2020 results were significantly boosted by Covid-19 demand.” – Matthew Kanterman and Jitendra Waral, analysts.

Nintendo has stoked the gadget’s popularity with customized limited editions, a cheaper Switch Lite and a series of blockbuster titles driving hardware sales. Its upgraded forecast for the remainder of the year is still deemed “way too low” by Hideki Yasuda, an analyst at Ace Research Institute, who projects the company’s full-year tally will be closer to 28 million Switch units.

In 2020, Animal Crossing tapped into the need for soothing escapism during lockdowns and helped push software sales up 43% to 176.1 million in the nine months ended December. The company’s digital sales more than doubled in the same period and rose from 28.6% to 40.9% of all software sales.

“The Switch has turned from being a console to a lifestyle product ‘tailor-made’ for Covid-19 times, with Nintendo surfing on that wave,” said Tokyo-based industry analyst Serkan Toto.

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