Despite the launch of new titles in the “Tomb Raider” and “Just Cause” franchises in 2018, Square Enix experienced declines across the board, according to the publisher’s latest financial results released on Wednesday.
“New titles such as “Shadow of the Tomb Raider” and ”Just Cause 4” bolstered sales YoY,” says Square Enix in slides from its financial results. “but profits declined YoY due to increased amortization of game development cost, advertising spending.”
The company announced that net sales for its digital entertainment sector actually rose year-on-year for the quarter running from October to December 2018. This was aided by the launch of “Just Cause 4” which was released at the start of December, and ongoing sales for “Shadow of the Tomb Raider,” which released in September, as well as a general boost in sales over Christmas.
As such, Net sales was hit the softest, with a 4.8 percent decline year-on-year. In 2018, Square Enix saw net sales of $1.63 billion for the nine months ending December 31, compared to the $1.71 billion achieved during the same period in 2017.
But operating income and ordinary income were impacted more heavily. Operating income was down a whopping 65.3 percent year-on-year to $106 million, while ordinary income fell 54.1 percent to $145.5 million.
And in its Digital Entertainment sector, Square Enix experienced another drop in net sales for the nine month period, falling from 9.1 percent to $1.19 billion, while operating income fell by 59.3 percent to $134.9 million.
“Many FY2018/3 titles underperformed, failing to add sales on top of established titles,” reads a statement from Square Enix. “Less licensing income, greater advertising spend also caused YoY sales and profit declines.”
The company now plans to focus on “selected titles and releasing titles utilizing existing IPs” as well as to rebuild its “development and operation organizations” and “strive to create new hit titles.”
The publisher says it expects net sales for the full financial year to be up by 7.8 percent over the previous year, reaching $2.46 billion. However, profits are expected to decline, with Square Enix forecasting $191.3 million, which is 18.7 percent down year-on-year.
Square Enix is also hoping to experience a boost from the release of “Kingdom Hearts 3” which has so far shipped five million copies across physical shipments and digital sales.