Square Enix Says Sales of AAA Games Like Final Fantasy 7 Rebirth, Final Fantasy XVI Fell Short of Expectations

Shares of Square Enix Holdings Co. tumbled 16% in their biggest decline in 13 years after its president said sales of recent big-budget games disappointed and that it would take years for a recent reorganization to bear fruit.

Sales of Final Fantasy VII Rebirth, Final Fantasy XVI and Foamstars — all released exclusively for Sony Group Corp.'s PlayStation in the previous fiscal year — fell short of the Japanese game publisher's expectations in both revenue and profit, Takashi Kiryu told analysts the previous day. The company now expects to earn an operating income of ¥40 billion this year, widely missing the average of analyst estimates of ¥57 billion. Its sales and dividend outlook also fell short of expectations.

Shares in Square Enix fell by their daily limit on Tuesday to a four-month interday low.

Kiryu, 48, has overhauled the company's structure around big-budget games while scrapping many mobile and console games under development to focus on quality over quantity. The publisher's also departing from its practice of releasing its top-tier games first on PlayStation, and will make them available to as many platforms as possible, including Nintendo Co.'s platforms, Microsoft Corp.'s Xbox and the PC, Kiryu said.

But it will take time for such efforts to translate into sales, he said.

“It may be great that the company's overhauled its game-making pipelines and is rebooting the company, but what do they have to sell this year and next?” Toyo Securities analyst Hideki Yasuda said. Jefferies analyst Atul Goyal downgraded his recommendation on the stock to underperform and cut his target price to ¥4,600 per share.

Kiryu's remarks suggest the company's failed to lift sales momentum on Final Fantasy XVI, which investors had anticipated would bolster its bottom line after its June release last year. After the game's tepid reception in its first week of sales, Kiryu had said the company planned to sustain sales of the title over the longterm. No sales figures have been released for Final Fantasy VII Rebirth and Foamstars.

Square Enix's mobile games have also been struggling, with many games shut down in a little over a year due to poor sales. “Our winning formula is no longer effective,” Kiryu said. “It took us a long time to adjust the course.”

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