Look at that graph. Look at these numbers. Let’s face it: Nintendo Switch 2020 is Animal Crossing.
☆ NintendObs Event – Nintendo Q1 FY3/2021.
★ NintendObs Daily – Thursday, August 13, 2020.
Year-on-year, net sales for this first quarter rose 108.1% to 358.1 billion yen, operating profit rose by 427.7% to 144.7 billion yen, ordinary profit rose by 576.2% to 150.3 billion yen, and net profit attributable to owners of parent rose by 541.3% to 106.4 billion yen.
Sales from our dedicated video game business grew by 113.2% year-on-year to 344.5 billion yen. Nintendo Switch hardware and software both performed well, resulting in an overall sales growth.
Sales from mobile, IP-related income increased 32.7% to 13.2 billion yen, led in particular by the year-on-year growth in smart-device transactions.
Gross profit increased 153.6% year-on-year to 211.5 billion yen due to increased sales.
The gross profit margin increased by 10.6 percentage points year-on-year to 59.1%. Although the strength of the yen had a negative impact, this was overcome by a rise in the proportion of dedicated video game platform sales made up of software and an increase in the ratio of first-party software sales as well as digital sales to the overall software sales.
Selling, general and administrative expenses (referred to as SG&A expenses below) increased 19.3% year-on-year to 66.8 billion yen, mainly due to a rise in expenses such as research and development expenses and settlement fees accompanying an increase in digital sales. Mainly due to an increase in total sales, the ratio of SG&A expenses to total sales decreased by 13.8 percentage points to 18.7%.
Year-on-year, operating profit rose 427.7% to 144.7 billion yen, as a result of a large increase in gross profit and a decrease in SG&A expenses-to-sales ratio. Operating profit ratio increased by 24.5 percentage points to 40.4%.
Ordinary profit rose 576.2% year-on-year to 150.3 billion yen, mainly due to an increase in operating profit, and a foreign exchange loss of 12.0 billion yen in the previous fiscal year.
Net profit attributable to owners of parent rose by 541.3% to 106.4 billion yen.
There are no changes to the consolidated financial forecast for the year to March of 2021 that was announced on May 7, 2020.
Note:
Appropriate Use of Earnings Forecasts Statements relating to future projections represent the judgments made by Nintendo management based on information that was available at the time they were written, and therefore include certain potential risks and uncertainties. Regarding the impact of COVID-19 on our earnings forecasts, production and sales volumes may decrease for a certain period of time, but we anticipate that production and sales will be able to meet demand for the full year and that we will be able to release software titles now in development as planned. That being said, there are many elements of uncertainty, so if there is a need to revise our earnings forecasts at a later date, we will promptly disclose those revisions. Please be aware that such risks and uncertainties may cause actual results to be materially different from these forecasts (including but not limited to earnings forecasts and dividend forecasts).
Sales for the entire Nintendo Switch family rose 166.6% year-on-year to 5.68 million units. That breaks down to sales of 3.05 million units of Nintendo Switch and 2.62 million units of Nintendo Switch Lite.
Regarding software, Animal Crossing: New Horizons, which was released last fiscal year, contributed greatly to overall growth in sales and posted sales of 10.63 million units for a cumulative sales total of 22.40 million units. Two new titles released in this fiscal year are Xenoblade Chronicles Definitive Edition, which sold 1.32 units, and Clubhouse Games: 51 Worldwide Classics, which sold 1.03 units. In addition, evergreen titles that were released in previous fiscal years continued to sell. Sales of titles from other software publishers also continued to grow steadily, and as of this fiscal year, there are a total of 9 million-seller titles, including titles from other software publishers.
As a result of these factors, total software sales grew 123.0% year-on-year to 50.43 million units.
COVID-19 created some difficulties in procuring the parts required for the manufacture of Nintendo Switch consoles, but the situation has almost recovered. However, if the impact of COVID-19 expands in the future, it may affect manufacturing, etc. Regarding Nintendo Switch consoles, because there is a time lag between production and the stocking of store shelves, and because demand remains strong, there are still shortages in some regions. We work hard to be able to deliver these products to consumers as quickly as possible.
So far, we have been describing sell-in, or the number of external sales from the Nintendo group, but from here on we’d like to turn the discussion to sell-through, which is the number of sales from retailers to consumers.
The estimated global sell-through for Animal Crossing: New Horizons at the end of June exceeded 20 million units. This is far more than the lifetime cumulative sell-through of 12 million units seen for Animal Crossing: New Leaf for Nintendo 3DS, which was the previous best-selling entry in the Animal Crossing series. This increase in sales was made possible by the large number of new consumers purchasing the game, in addition to the people who had played past titles in the Animal Crossing series.
The number of consumers who started playing on Nintendo Switch because of this game continued to increase during the first quarter, from April to June 2020. Of all systems in the Nintendo Switch family that were played for the first time during this period, over half were used to play Animal Crossing: New Horizons on the first day.
And in terms of overall sell-through for Nintendo titles (in Japan, the US, and Europe), we also see substantially higher results between April and June 2020 compared to the same period in the previous year, of which Animal Crossing: New Horizons accounts for more than 40%. Furthermore, there is a high ratio of digital sales of this title in Japan, the US, and Europe. The ratio differs by region, but overall is around 50%.
Worldwide cumulative sell-through of Ring Fit Adventure, released in October 2019, reached 4.0 million units as of the end of July.
Demand for this new proposal from Nintendo of exercising by playing an adventure game was so much higher than our forecasts that the global supply has been unable to keep up since release. We saw a temporary drop in sell-through due to product shortages, especially in March through May, but we have since increased production and shipments of the Ring-Con and Leg Strap accessories that are included with the software, which has helped sell-through to be recovering.
The lingering effects of this product shortage in the market are still an inconvenience to a large number of consumers, but as with the Nintendo Switch family of systems, we will continue to work to ensure a sufficient amount of shipments for the holiday season.
Digital sales for this fiscal year grew to 101.0 billion yen, a 229.9% year-on-year increase. Digital sales accounted for 55.6% of total software sales on our dedicated video game platforms.
Downloadable versions of packaged software, especially Nintendo Switch software, made up 67.7% of the overall digital sales. Clubhouse Games: 51 Worldwide Classics, released on June 5, recorded a digital sales ratio of over 50%.
Furthermore, Isle of Armor, the first part of Pokémon Sword Expansion Pass and Pokémon Shield Expansion Pass, the first-ever paid add-on content for the Pokémon series, was released on June 17, increasing sales of add-on content.
In addition to the growth in sales of indie titles and other digital-only titles with no corresponding physical versions, Nintendo Switch Online sales have been steady.
[Regarding calculation of digital sales]
In principle, sales of Nintendo software are recognized as gross sales while sales of software released by other software publishers are recognized as net sales.
Note: Sales commissions, which Nintendo receives on other publishers’ software based on contracts with other software publishers etc., are recognized as revenue.
Mobile, IP-related income grew by 32.7% year-on-year to 13.2 billion yen.
The mobile business showed steady growth compared to the same period of the previous year, bolstered not only by the record sales and record use of Animal Crossing: Pocket Camp, which benefited from the synergistic effect of the promotion and release of Animal Crossing: New Horizons, but also from Mario Kart Tour.
As for our IP-related business, although this is not included in the first-quarter results, the LEGO Group released LEGO Super Mario as a collaboration between LEGO and Super Mario in Japan on July 10 and overseas on August 1.
We are also implementing various other initiatives, and we are focusing not only on the dedicated video game platform business, but are also continuing to expand the number of people who have access to Nintendo IP.
Source: Nintendo JP.
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