Tomb Raider and Just Cause fail to offset wider declines at Square Enix

Square Enix has released its latest financial results, showing declines across the board thus far in the fiscal year.

Net sales suffered the least, reported as $1.63 billion for the nine months ended December 31, 2018. That's only a 4.8% decline year-on-year from the $1.71 billion achieved in the same period of 2017.

However, operating income and ordinary income have been impacted more heavily. The former is down 65.3% year-on-year to $106 million, while the latter fell 54.1% to $145.5 million.

Profits are down 60.1% year-on-year, from $203.5 million to $81.3 million.

There are a myriad of factors behind this decline, including lower sales and income for its merchandising business, lower operating income in its amusements business, and an overall decline in digital entertainment, which handles its video games.

These latest results also reflect the $33m extraordinary loss Square Enix reported earlier as a result of its in-depth review of the business strategy for subsidiary Luminous Productions.

Looking more closely at digital entertainment, the segment's net sales for the nine-month period dropped 9.1% to $1.19 billion, and its operating income decreased by 59.3% to $134.9 million.

However, Square Enix notes that net sales for digital entertainment actually rose year-on-year for the most recent quarter (October to December 2018). This was helped by the launch of Just Cause 4 (released at the beginning of December), ongoing sales for Shadow of the Tomb Raider (which released in September), and the general sales boost all publishers enjoy around the holidays.

Net sales for said quarter were up from $377.3 million to $433.8 million -- a year-on-year rise of around 15%.

This was not helped by declines in the MMO and mobile spaces, where "many of the titles launched in the prior fiscal year performed below expectations and failed to generate additional revenue on top of that from existing games."

In MMOs in particular, the decline of net sales and operating income can be attributed to the fact that expansions for Final Fantasy XIV and Dragon Quest X launched in the previous year.

Looking forward, Square Enix is hoping for a boost from Kingdom Hearts III -- which has already shipped five million copies across physical shipments and digital sales -- plus the revenues from new mobile title Romancing SaGa (which released in December but won't be recognised until the next quarter's results).

The publisher expects net sales for the full financial year to be up by 7.8% over the previous one at $2.46 billion, although profits are expected to take a hit, forecast at $191.3 million -- 18.7% down year-on-year.