Nintendo Switch Is Driving Sales And Stock Prices Of Many Retailers

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Nintendo Switch has come as a blessing for several retailers. The blockbuster gaming console is still out of stock at most retail outlets even almost three months after launch. The Japanese company has been shipping the console via air to meet the massive demand. Nintendo Switch is benefiting not just its makers, but also multiple retailers that had long been struggling to boost sales.

Best Buy, Target get a sales boost from Nintendo Switch

Best Buy shares rallied a staggering 18.33% to $59.63 on Thursday after the company reported its quarterly results. Both the electronics retailer and the Wall Street were previously expecting the sales to decline 1.5%, but the actual sales rose 1.6% during the quarter. Best Buy CEO Hubert Joly attributed the sales growth to a “strong performance in gaming.”

Joly said the strong demand for Nintendo Switch helped drive its sales. For the quarter ending April 2017, the retailer reported revenues of $8.52 billion and net income of $188 million, beating the Wall Street forecasts of $8.27 billion and $125.5 million in revenues and earnings.

Best Buy also issued a strong guidance for the current quarter. It forecasts the current quarter sales to grow between 1.5% and 2.5%. It expects revenues between $8.6 billion and $8.7 billion, well above the Wall Street projections of $8.48 billion. The company forecasts current quarter earnings of 57-62 cents, compared to the Wall Street expectations of 59 cents.

Best Buy is not the only retailer witnessing a sales growth due to Nintendo Switch. Gaming has turned out to be a rare bright spot for the ailing retail industry. Target, which reported its quarterly results last week, also said its electronics sales “leapt forward” due to the Nintendo Switch. Strong performance in electronics category helped Target post a smaller than expected decline in sales.

Nintendo stock hits nine-year high

Nintendo itself has seen its stock soaring since the launch of Switch. On Wednesday, its shares skyrocketed to 31,880 yen, the highest level since October 2008. It has now become the 19th largest listed company in Japan. The stock is up 30% year-to-date amid hopes that Nintendo will be able to unlock new revenue streams such as in-game purchases.

The hybrid console sold 2.74 million units during the first month of launch. The Legend of Zelda: Breath of the Wild sold 2.8 million in the same period, which is even higher than the sales of the console on which it can be played. The Switch has turned out to be Nintendo’s first real success after Wii, which was released more than a decade ago.

Nintendo Switch to double Nintendo’s annual profits

In July last year, Nintendo shares had jumped more than 100% within a matter of days following the launch of the augmented reality game Pokemon Go. However, the stock tumbled after the company clarified that it held only a small stake in Niantic, and it wasn’t going to make a fortune from the direct sales from Pokemon Go. Nintendo had received only a small licensing fee and compensation for the development time.

Nintendo said last month that it expected the Switch to bring it out of an eight-year sales decline. Nintendo’s sales have been declining since 2009. The company forecasts the strong sales of Nintendo Switch would double its annual operating profits. Nintendo president Tatsumi Kimishima said recently that if Switch sales hit the 10 million units mark by Christmas this year, then it will go on to exceed the Wii sales in the long run. Wii, released in 2006, had sold more than 100 million units over its lifetime.

Nintendo needs to keep up with demand

IHS Markit analyst Piers Harding-Rolls said the biggest risk before Nintendo was that it might not be able to keep up with the consumer demand, even though the company has doubled production. The Switch has been praised for its ease of use and versatility. Users can play games at home or on the go. As The Guardian points out, the Switch has been designed more like a mobile phone than a PC. That’s what differentiates it from the Xbox One and PlayStation.

Gaming titles have also been critical to the success of Nintendo Switch. The Legend of Zelda: Breath of the Wild has been driving gamers crazy. It has been called the “best launch title for 20 years.” The Breath of the Wild has sold even more copies than the Switch console itself. Nintendo is bringing a number of exclusive titles this year to keep attracting gamers. Its lineup includes the ARMSSplatoon 2, and Super Mario Odyssey. 

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