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Nintendo cuts Switch sales forecast 6%; says can't fulfill holiday demand

Nintendo cuts Switch sales forecast 6%; says can't fulfill holiday demand
Nintendo cuts Switch sales forecast 6%; says can't fulfill holiday demand   -   Copyright  Thomson Reuters 2021
By Reuters

By Sam Nussey

TOKYO -Nintendo Co Ltd on Thursday cut its full year Switch sales forecast by 6% to 24 million units and said it would struggle to meet demand in the key year-end shopping season as chip shortages disrupt production of the hit device.

“We can’t produce enough to meet the demand we are expecting during the upcoming holiday season,” Nintendo President Shuntaro Furukawa told a news briefing.

The global chip shortage is hampering efforts by the Kyoto-based firm to boost sales of its aging Switch device, which is in its fifth year on the market.

“Currently there is no sign of improvement and the situation continues to be severe so I can’t say how long it will continue,” Furukawa said.

Sales of the Switch device slumped to 8.28 million units in the six months to end September, compared to 12.53 million in the same period a year earlier.

Its previous full year sales target was 25.50 million units.

Nintendo launched the $349.99 Switch OLED model on Oct. 8 ahead of the year-end shopping season but it remains in short supply in many markets.

With console gaming a cyclical business and Nintendo highly dependent on a single system, the timing of Switch peak sales is the focus of intense debate among investors and analysts.

Early data points to the improved Switch OLED model giving sales a bump. However, some observers worry that many buyers are likely upgraders rather than new customers, diminishing the potential bounce for software sales.

“Our main concern is still a lackluster game pipeline combined with a sharply declining tie-ratio that is likely to drive earnings lower,” Jefferies analyst Atul Goyal, who has downgraded Nintendo to underperform, wrote ahead of earnings.

Tie-ratio is a closely watched indicator that refers to the amount of software bought by hardware owners.

However, most analysts remain bullish, with 11 of 18 analysts having a “strong buy” or “buy” rating on the stock, according to Refinitiv data.

Nintendo shares, which closed down 1.7% ahead of earnings, have declined by 25% this year.