Nintendo Co Ltd share price down, posts worse-than-expected first-quarter loss amid sluggish console sales

Japanese video game maker Nintendo reported a worse-than-expected first-quarter operating loss as the companys Wii U console struggled to keep up with its competitors from Sony and Microsoft, as well as the fast-developing mobile gaming segment.

Nintendo reported that sales fell by 8.4% on an annual basis in the three months through June to 74.7 billion yen. The companys net loss soared to 9.9 billion yen ($97 million), compared to analysts projections for a loss of 5.4 billion yen and last years 8.6-billion profit during the comparable period.

The video game maker reaffirmed its forecast to return back to profit in the fiscal year ending March 2015, expecting a profit of 20 billion yen and an operating profit of 40 billion yen, above analysts expectations for 25.02 billion.

Apart from the heavy competition in the face of Sonys PlayStation 4 and Miccrosofts Xbox One consoles, Nintendos sales have suffered from the tendency of gamers to switch to cheaper games for mobile devices, which attracted many new game developers to compete in the market. That trend pushed Nintendo into its second annual loss on record in the fiscal year ended March 2014, amounting to 23 billion yen.

At the beginning of 2014, Nintendo argued that there was no point for it to enter the mobile gaming segment since it was highly competitive and stuck to its traditional model of selling boxed consoles and video games.

However, although the Mario Kart 8 game, in which players can drive a Mercedes-Benz, managed to sell 885 000 units in the US since it was released in May, it failed to lift the companys console sales high enough. Gamers bought only 510 000 Wii U consoles in the first fiscal quarter and Nintendo maintained its forecast to sell a total of 3.6 million units through March 2015.

At the same time, Sonys PlayStation 4 sales managed to outstrip those of the Wii U, although Nintendos product hit the stores a year earlier. Nintendos Wii U cumulative sales since its release totaled 6.68 million by the end of June, well behind PlayStation 4s 8.7-million sales.

Meanwhile, purchases of Nintendos 3DS hand-held console fell to 820 000 units in the three months through June, compared to 1.4 million a year earlier.

The Japanese video game maker will release a number of titles by next year, including a new Zelda game, a Mario racing game that allows players to create their own courses and a title called Captain Toad: Treasure Tracker. Holders of the 3DS console can expect a new Pokemon game.

Nintendo also outlined plans to release figurines called “Amiibo” which can interact with games when tapped against the Wii U console.

Nintendo Co Ltd fell by 0.64% in Tokyo today before the earnings report was released, to close the session at 12 325 yen, marking a one-year change of -5.70%. The companys stock traded in Frankfurt declined by 5.25% to 86.00 euros by 13:21 GMT. According to the Financial Times, the 15 analysts offering 12-month price targets for Nintendo Co. Ltd have a median target of 11 400 yen, with a high estimate of 15 000 yen and a low estimate of 9 000 yen. The median estimate represents a -8.10% decrease from the last price of 12 405 yen.