Ubisoft Blames Weak Q1 on Market Conditions, Sales Trends

Amidst solid annual earnings last April, French game publisher Ubisoft (UBSFY.PK) waved a caution flag and warned its year over year sales results would likely slip for the quarter ended June 30th. Maybe they should have grabbed a megaphone to broadcast the revenue warning too.

Monday, the company reported first quarter sales 12.6% below guidance.(release (PDF file))

For Q1 2009-10, Ubisoft’s sales came in at EUR 83m, down 50.6%.

The company blamed a combination of market conditions and surprise sales trends for the result. Casual games for the DS were among those singled out.

“We are currently experiencing a very sharp slowdown in our sales for Nintendo (NTDOY.PK) DS as well as sales of back catalog titles, in the context of a market that is tougher than we anticipated,” said CEO Yves Guillemot. [click to enlarge graphic]

In consideration of the climate, the company is revising its full year ahead targets downward. Sales are now expected to come in at EUR 1.04b, with operating income before stock-based compensation representing at least 7% of sales. The company had previously guided for sales of approximately EUR1.1 with Op Income at least 11% of sales. The company is targeting sales growth of 23% for the second half.

Sales for the second quarter were also adjusted downward. The company is guiding for sales of around EUR 80m, equal to a 54% year over year decline. The company had previously forecast EUR 130m.

In addition to the weak earnings news, Ubisoft also revised its year-ahead product pipeline. Splinter Cell Conviction and Red Steel 2, previously scheduled for the third quarter, have been bumped to the fourth. Ghost Recon and I am Alive which were previously scheduled for Q4 have been pushed to the next fiscal year.