Ubisoft Entertainment SA said it expects full-year operating income will be in the red as delayed games and lower net bookings hurt the French game studio’s bottom line.
(Bloomberg) — Ubisoft Entertainment SA said it expects full-year operating income will be in the red as delayed games and lower net bookings hurt the French game studio’s bottom line.
The company expects an operating loss of €500 million ($538 million) for the current fiscal year, it said in a statement Wednesday, compared to an operating profit of €400 million it forecast when it published its most recent results.
The company is facing “major challenges” hitting the industry, including worsening macroeconomic conditions that weighed on the holiday market, as recent launches “have not performed as well as expected,” according to the statement.
Ubisoft shares dropped 21% in Paris at 9:14 a.m. on Thursday, the biggest intraday decline since 2019 and putting the stock price at its lowest level in nearly seven years.
The publisher behind the Assassin’s Creed franchise revised its net bookings target for the third quarter of the 2022-23 fiscal year, which is due to be published Feb. 16, to around €725 million, compared to previous guidance of around €830 million.
It also announced a €500 million writedown attributed in part to the cancellation of three unannounced games, on top of four it shelved in July.
A cost reduction plan of €200 million over two years will include not replacing some employees who leave the company, as well as the sale of non-core assets.
Disappointing Sales
The studio released Mario + Rabbids: Sparks of Hope on Oct. 20, a game developed with Nintendo that was expected to be one of the group’s best-sellers for the holiday season and had disappointing sales, as well as Just Dance 2023, the company said.
“We are clearly disappointed by our recent performance,” Chief Executive Officer Yves Guillemot said in the statement. “We are facing contrasted market dynamics as the industry continues to shift towards mega-brands and everlasting live games, in the context of worsening economic conditions affecting consumer spending.”
Ubisoft announced a new non-IFRS operating income target of around €400 million for the next fiscal year, “reflecting necessary prudence” and “an overall strong topline growth thanks to a materially stronger line-up,” the company said. An Avatar game and a new Assassin’s Creed are among the blockbusters it plans to release in the period.
The studio has been working to overcome a post-pandemic production crunch also seen among peers. Ubisoft said in September it would postpone the launch of its pirates game Skull and Bones, which has faced repeated delays and is now expected in the next fiscal year.
Holiday sales have disappointed across the gaming industry. Shares of Frontier Developments Plc tumbled on Monday after it said sales of its flagship F1 Manager 2022 title were below expectations, sending a chill through the video game sector.
(Updates with share price move in fourth paragraph.)
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