Shares in Ubisoft fell by as much as a fifth on Thursday after the French games company slashed its forecasts and said that sales over the crucial holiday season had been “markedly and surprisingly slower than expected”.
Paris-based Ubisoft, best known for its Assassin’s Creed and Just Dance franchises, said on Wednesday that it expected net bookings to drop 10 per cent in the financial year that ends in March from 12 months earlier. The group had previously forecast a 10 per cent rise.
Its shares opened as much as 20 per cent lower in early trading in Paris on Thursday, the first day of trading since the statement was published after markets closed, touching their lowest level for almost seven years. After paring losses later in the day, Ubisoft’s stock closed 14 per cent lower at €20.52.
The warning from Ubisoft suggests that macroeconomic pressures are starting to hit the games industry, despite hopes that interactive entertainment would prove more resilient in a recession, as it has in previous downturns.
Ubisoft is the second games company this week to lower its guidance after a disappointing Christmas. Shares in UK-based Frontier Developments dropped 40 per cent on Monday after it said sales of its flagship title F1 Manager 2022 “fell materially below expectations, potentially due in part to increased player price sensitivity related to worsening economic conditions”.
“We are clearly disappointed by our recent performance,” said Yves Guillemot, Ubisoft’s co-founder and chief executive.
Ubisoft sliced more than €100mn from its third-quarter net bookings target, now set at about €725mn, citing lower-than-expected sales of games including the latest instalments of its Mario + Rabbids and Just Dance franchises, amid “worsening macroeconomic conditions”.
“The trends over the holiday season, in particular the last weeks of December and beginning of January, have been markedly and surprisingly slower than expected,” Ubisoft said.
It has also delayed its launch of the title Skull and Bones until the next financial year in order to “build awareness” for the game, as well as cancelling three unannounced projects.
The company is writing off €500mn of capitalised research and development costs, which it said reflected “increased cautiousness related to the current challenging video game market”, as well as narrowing its focus to core franchises, including Far Cry and Assassin’s Creed.
As a result of all these factors, operating losses in the current financial year will be around €500mn, compared with its previous expectation of profits of €400mn, Ubisoft said. Hinting at job cuts, the company said it planned to reduce operating costs by €200mn over the next two years.
Analysts at Citi called Ubisoft’s update a “crushing profit warning” in a note to clients, suggesting that weak holiday sales were a “broader phenomenon” for the games industry.