Ubisoft shares fell by as much as a fifth on Thursday after the French games company cut its forecasts, saying sales during the crucial Christmas season had been “markedly and surprisingly slower than expected.”
Paris-based Ubisoft, best known for its assassin’s Creed Y Just dance franchises, said Wednesday that it expected net bookings to fall 10 percent in the fiscal year ending in March from 12 months earlier. The group had previously forecast a 10 percent increase.
Its shares opened as much as 20 percent lower in early trading in Paris on Thursday, the first day of trading since the post-markets close statement, touching their lowest level in nearly seven years. After paring losses later in the day, Ubisoft shares closed down 14% at €20.52.
Ubisoft’s warning suggests that macroeconomic pressures are starting to hit the games industry, despite hopes that interactive entertainment will prove more resilient in a downturn, as it has in previous downturns.
Ubisoft is the second game company to drop its guide this week after a disappointing Christmas. Shares of UK-based Frontier Developments fell 40 percent on Monday after it said sales of its flagship title F1 2022 Manager “fell materially below expectations, possibly due in part to increased player price sensitivity related to worsening economic conditions.”
“We are clearly disappointed by our recent performance,” said Yves Guillemot, co-founder and CEO of Ubisoft.
Ubisoft cut more than €100 million from its third-quarter net booking target, now set at around €725 million, citing lower-than-expected game sales, including the latest installments of its Mario + Rabbids Y Just dance franchises, amid “worsening macroeconomic conditions.”
“Trends during the holiday season, particularly the last weeks of December and early January, have been markedly and surprisingly slower than expected,” Ubisoft said.
It has also delayed its release of the title. skull and bones until the next fiscal year to “raise awareness” for the game, as well as canceling three unannounced projects.
The company is writing off 500 million euros of capitalized research and development costs, which it said reflected “greater caution related to today’s challenging video game market,” as well as narrowing its focus to core franchises, which include Far away Y assassin’s Creed.
As a result of all these factors, operating losses in the current financial year will be around 500 million euros, compared with its previous profit expectation of 400 million euros, Ubisoft said. Citing the job cuts, the company said it planned to reduce operating costs by 200 million euros over the next two years.
Citi analysts called Ubisoft’s upgrade a “crushing profit warning” in a note to clients, suggesting that weak holiday sales were a “broader phenomenon” for the games industry.