Coming out of the 2013 holiday season, Nintendo took a look at their financial situation and they didn't like what they saw. The company has announced drastic cuts to their previous financial forecast for the fiscal year ending on March 31, 2014.
Way back in April 24, 2013, Nintendo gave a total sales estimate of ¥920 billion ($8.8 billion), but now the company is dialing that number back to ¥590 billion ($5.7 billion). Net income was estimated to be ¥55 billion ($527 million) in profit, but is now being projected as a ¥25 billion ($240 million) loss.
In a press release, Nintendo president Satoru Iwata explained that Wii U sales missed estimates "by a large margin." How did Nintendo miss its earlier forecast? Hardware sales below expectations led to software sales below expectations. The Nintendo Wii U's sales forecast was 9 million units for the year, but that number's been knocked down to 2.8 million. This is only a forecast, meaning Nintendo expects to sell that many Wii U's globally by the end of March 2014. That big cut in the hardware estimate led to Wii U software sales estimates dropping from 38 million units down to 19 million units.
"In particular, sales in the U.S. and European markets ... were significantly lower than our original forecasts, with both hardware and software sales experiencing a huge gap from their targets," he stated. "In addition, we did not assume at the beginning of the fiscal year that we would perform a [price cut] 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."
Sales estimates for the Nintendo 3DS were lowered as well, but nowhere near as deep as the Wii U. Nintendo now expects the 3DS to sell 13.5 million systems, down from an estimate of 18 million. Software sales will follow, dropping from 80 million down to 66 million. Iwata explained that while the 3DS sales in Japan remained strong, sales in overseas markets did not meet expectations. Recent NPD numbers show US 3DS sales surpassing 11.5 million units, making it the best-selling platform for 2013, but that number is still below Nintendo's own forecast.
"In Europe, while the individual markets showed different results, France was the only market in which we experienced relatively strong sales, and we failed to attain our initial sales levels by a large margin in other countries," said Iwata.
While the Wii estimate was also cut down to 1.2 million units, software sales estimates were tuned upwards to 26 million units.
Nintendo can certainly survive the change in forecast, but the weather is starting to turn cloudy for the company. They need some clear way out of their current predicament, because their current strategy isn't working. Will Mario Kart 8 be the savior they want, or will Nintendo have to try something completely different?
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