Nintendo plans a 10-for-1 stock split; says Switch sales will drop 9%

Nintendo announced on Tuesday a 10-for-1 stock split as the Japanese gaming giant aims to make its shares more attractive to retail investors.

Shareholders have long been asking for a stock split to increase the liquidity of the gaming giant’s shares. The move will take effect on October 18 of this year, when each common share will be split into 10 shares.

A number of major technology companies, including Apple aand Amazonhave announced the stock split in recent years. They don’t fundamentally change society in any way, but they do make a single stock cheaper which could make them more attractive to retail investors.

Stock splits are generally positive for a company’s stock price. Nintendo shares have risen 5% since the beginning of the year despite other major tech companies losing billions of dollars in value this year amid a strong sell-off of risk assets.

The Kyoto-based company also announced plans to buy back shares worth Japanese yen 56.36 billion ($ 432.9 million). The operation will take place on Wednesday.

Pressures on the supply chain have affected change sales

The surprise announcement of Nintendo’s stock split came when it reported earnings for the fiscal year ended March 31. Revenues were Japanese yen 1.69 trillion, down 3.6% year-on-year. Net profit fell 0.6% to 477.6 billion yen.

Part of this weakness is due to the Switch’s declining sales, despite the company rolling out a new organic light-emitting diode (OLED) model during the fiscal year. Sales of the console range were 23.06 million units last financial year, down from 28.83 million in the previous 12 months.

Nintendo said Switch sales were “affected by the shortage of semiconductor components and other parts”.

The Japanese giant expects sales of 21 million units of the passage in the current fiscal year ending in March 2023. This is a 9% decline on an annual basis.

Nintendo has warned that if Covid-19 restrictions interfere with manufacturing or transportation, they could impact product supply. The company also said that the manufacturing of products could continue to suffer from difficulties in sourcing parts such as semiconductors.

Game sales remain strong

Despite a decline in Switch sales, console gamers have continued to buy Nintendo games. Software sales increased 1.8% in the last fiscal year, driven by demand for popular games including “Pokemon Legends: Arceus” and “Mario Kart 8 Deluxe”.

Nintendo said it now has 100 million users playing per year. The Japanese giant has a strong portfolio of recognized characters and games that it has been able to capitalize on throughout its history. Meanwhile, Sony and Microsoft have tried to create their so-called first party games by acquiring game production companies or creating their own studios.

Nintendo said sales of its Switch game console fell in the financial year ended March 31 due to supply chain constraints, including semiconductor shortages. The Japanese gaming giant expects another drop in switch sales in the currency’s fiscal year.

Behrouz Mehri | AFP | Getty Images

In January, Microsoft plans announced buy Activision Blizzard for $ 68.7 billion, while Sony agree with acquire video game maker Bungie for $ 3.6 billion.

Nintendo has a strong pipeline of upcoming games, including “Nintendo Switch Sports,” but said it plans to move 210 million units of software in the year through the end of March 2023, a 10.7% drop on base. yearly.

However, one analyst thinks Nintendo’s guidance is too cautious. Serkan Toto, CEO of Kantan Games, a Tokyo, Japan-based consultancy firm, said that the decline in software revenue made him “mind blown”.

“We are only a few weeks away from the start of taxation [year]and Nintendo’s first-party gaming pipeline already includes eight titles. They just launched “Switch Sports”, “Splatoon 3” will arrive in September and will be followed by a new open world Pokémon game. The hardware installation base will also increase, “Toto told CNBC.

“Why the hell are they anticipating a reduction in software? It doesn’t make sense.”