Ubisoft's Q1 Sales Drop 51%, Outlook Reduced

French publisher Ubisoft today announced its fiscal results for the first quarter ended June 30. Sales came in 12.6% lower than the company had anticipated, plummeting 51% to $83 million euros ($113.71 million). 

So what led to this decline? Ubisoft blamed three things in particular: "A slowdown in sales of Nintendo DS games in Europe and the United States that was more pronounced than expected, impacting back-catalog sales as well as new launches; significantly lower back-catalog sales of titles for PlayStation 3 and Xbox360 than in the first quarter of 2008-09; and poorer-than-anticipated market conditions."

The company has now slashed its outlook for the second quarter and full fiscal year. For the current Q2, sales are expected to drop 54% to 80 million euros ($109.60 million). For the full fiscal year, Ubisoft now expects sales to be approximately 1.040 billion euros ($1.4 billion), with current operating income before stock-based compensation representing at least 7 percent of sales; this compares with the previous guidance of around 1.1 billion euros ($1.51 billion) and at least 11 percent of sales. 

Importantly, Ubisoft has also delayed several of its upcoming high-profile games. Both Splinter Cell Conviction and Red Steel 2, which has been slated for this Q3 (the holiday sales period), have been bumped into Q4, which is the first quarter of calendar 2010. Additionally, Ghost Recon and I am Alive, which were scheduled for release in Q4, are now planned for sometime in the fiscal year 2010-11 (which starts next April).

"We are currently experiencing a very sharp slowdown in our sales for Nintendo DS as well as sales of back-catalog titles, in the context of a market that is tougher than anticipated. This will have a significant impact on our first-half showing. Against this backdrop, the solid performance of our Wii titles combined with the successful launches of Anno and Call of Juarez are points of satisfaction and demonstrate that good products are continuing to sell well," said Ubisoft CEO Yves Guillemot.

"We are disappointed that we have to postpone the release of several major games but we consider that this choice is the best one in the long-term interests of Ubisoft. Lastly, we are adjusting our full-year targets to take into account the fall in business over the first half of the fiscal year. The excellent response to our games at E3, as well as the high buzz generated for titles such as Assassin's Creed 2, Splinter Cell Conviction and Avatar, reinforce our belief that the company can achieve strong growth in the second half of the fiscal year."