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Nintendo Reports Wider Than Expected Q1 Loss

Net Sales down 31% from a year ago have pushed the Big N back into the red for the first quarter of their fiscal 2017.

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Nintendo reported disappointing Q1 results after the close in Japan today.The quarter was lacking any sort of positive catalyst as not one Nintendo software title on 3DS or Wii U sold 1 million units. The Pokemon Go launched in the second quarter of Nintendo's fiscal 2017 and its massive success has yet to be reflected in the bottom line results of the company. Nintendo also pointed out that Super Mario Maker had launched in the year ago quarter, creating difficult year over year comparisons.

  • Sales of Nintendo 3DS hardware and software were 0.94 million (7% decrease on a year over year basis) and 8.47 million units (7% increase on a year over year basis) respectively.
  • Sales of Wii U hardware and software were 0.22 million (53% decrease on a year over year basis) and 4.68 million units (3%
    increase on a year over year basis) respectively.
  • Amiibo figure-type and the card-type sales remained at approximately 1.7 million units and 1.3 million units respectively
    mainly due to a lack of new titles that are compatible with amiibo

Adding to the downward pressure in sales was the appreciation of the Yen versus the Dollar and Euro. 72 percent of Nintendo's sales come from International markets. 35 billion of the 38.6 billion yen loss was attibutable to foreign currency exchange losses. This should make shareholders feel a little bit better as Nintendo can't control currency markets. The strong Yen is a headwind that all Japanese exports face and the Bank of Japan is expected to take action to alleviate those pressures in an upcoming meeting.

Looking towards the rest of their fiscal 2017, Nintendo reaffimed the launches of Pokemon Sun and Moon this fall and NX in March of 2017. Regarding their mobile app roadmap the company said, "We will release new apps such as Fire Emblem and Animal Crossing. By continuously introducing apps for smart devices, we aim to maximize the population that has access to Nintendo IP. Alongside creating new demand, we aim to increase the synergistic effect on Nintendo’s dedicated game system business." It remains to be seen if Nintendo will be able to gain traction with their mobile apps outside of the smash hit Pokemon Go.

Nintendo also announced that Pokemon Go Plus will be delayed until September. This delay of the highly anticipated companion device to the wildly successful Pokemon Go app is just yet another blow to fans of the Big N. Nintendo surprisingly did not adjust their full year guidance and still expects to be profitable in fiscal 2017.

There are a number of positive catalysts ahead of Nintendo, but today's news will undoubtedly put downward pressure on the company's stock. Bold investors may view this as an opportunity to scoop up shares of a company that are down over 30% in a little over a week. 

Full Disclosure:

At the time of this article, Asif A. Khan, his family members, and his company Virtue LLC had the following positions:

Long Nintendo via NTDOY ADR

Asif Khan is the CEO and majority shareholder of Shacknews. He began his career in video game journalism as a freelancer in 2001 for Tendobox.com. Asif is a CPA and was formerly an investment adviser representative. After much success in his own personal investments, he retired from his day job in financial services and is currently focused on new private investments. His favorite PC game of all time is Duke Nukem 3D, and he is an unapologetic fan of most things Nintendo. Asif first frequented the Shack when it was sCary's Shugashack to find all things Quake. When he is not immersed in investments or gaming he is a purveyor of fine electronic music. Asif also has an irrational love of Cleveland sports.

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