Square Enix Warns Of Fiscal Extraordinary Loss, President Steps Down

Citing lower than expected sales for “major” console games in both North America and Europe, Square Enix announced today that they have lowered their forecast for the full fiscal year ending March 31, 2013 to show an “extraordinary loss.” As a result, the publisher is preparing to incur a costly ¥10 billion restructuring of the company, which includes the dismissal of president Yoichi Wada.

Previously, Square Enix’s forecast advised investors to expect ¥150 billion in net sales and ¥3.5 billion ($37 million) in net income for the current fiscal year. With today’s announcement, these projections have been revised to show a slightly lower ¥145 billion net income and a disappointing ¥13 billion ($138 million) net loss for the year. This net loss is especially troublesome when compared to the last fiscal year’s net profit of ¥6.06 billion ($64 million).

As part of the announcement, Square Enix released a slide (posted below) highlighting three of their titles that the publisher described as having “weak” expected sales for the current fiscal year; Sleeping Dogs (1.75 million), Hitman: Absolution (3.6 million), and Tomb Raider (3.4 million).

With Sleeping Dogs and Hitman: Absolution both releasing last year, it is somewhat understandable that Square Enix might have expected higher sales. However, it is hard to comprehend how Tomb Raider shipping 3.4 million copies in less than four weeks makes it a “weak” selling title. If 3.4 million units in less than a month (not including digital sales) is a level that results in this much turmoil, the development budget for these triple-A games is completely out of control.

Kind of makes you wonder what the sales threshold for a successful game will be next generation.

At any rate, Square Enix is putting most of the blame for these weaker than expected sales on its North American branch. The slide notes that the “NA sales force was ineffective, ending up with 2/3 of the number of units sold in Europe”.

Yoichi Wada will leave his post as Square Enix president this June and will not be reappointed to the company’s board of directors. Wada, who has been president and CEO since December 2000, is to be temporally replaced by former company director and CFO Yosuke Matsuda.