By Yi-Wyn Yen
How hot is the Nintendo Wii? Even with the U.S. economy in meltdown, Nintendo may still struggle to meet demand for the third straight holiday season.
Nintendo is aggressively ramping up shipments of its popular video game consoles to avoid the shortage it faced last December. The company will increase its Wii shipment by 50% from the same period a year ago for the retail quarter. Nintendo will also bump up shipments of the DS, its popular handheld, by 10%, says Nintendo of America president Reggie Fils-Aime.
Still, Nintendo is barely keeping up with demand this year. From January through August, the company sold 4.5 million Wiis in the U.S., a 45% increase from last year for the same period.
Those figures already put Nintendo slightly ahead of analyst estimates to sell 9 million units for the year. Nintendo makes roughly half of its sales during the holiday selling season - October through December. Last year during that period Nintendo sold 2.85 million Wiis and 4.5 million units of the DS, according to NPD.
Nintendo had underestimated the Wii-craze last year. The company had to offer rain checks to last-minute Christmas shoppers and consumers often paid a 100% premium on sites like Amazon (AMZN) to get the $250 video game system.
Nintendo even lowballed the demand for the DS. Last December Fils-Aime promised consumers that the DS would be available even if the Wii wasn't. In an interview with Fortune, Fils-Aime admitted that there was a DS shortage by mid-December. "We ran out for North American supply for the DS Lite," he says. "Actually we haven't lasted a holiday season ever for the DS."
The dual-screen handheld was introduced in November 2004. A new version of the DS, called the DSi, will feature two cameras and debut in Japan in November. Fils-Aime said the DSi will hit stores in the U.S. "well into 2009."
Fils-Aime was cautious on whether the company would be able to meet demand again this holiday. "I don't know if we'll be able to, but were we to get in a car right now and go to 100 retail locations in the San Francisco area, we would not be able to find a Wii in at least 60 of those stores," he says. "Our hope is that by next week, the Friday after Thanksgiving, and on Dec. 23, you'll be able to find a Wii."
Analysts anticipate strong sales for the Wii despite predictions of a broad decline in spending on consumer electronics. "It will sell well," said Lazard Capital equity research analyst Colin Sebastian in an e-mail. "The console remains in high demand, and I expect retailers will be using Wii's to attract store traffic throughout the shopping period."
The Kyoto-based company's profits increased 48% to $2.6 billion in profits in its 2008 fiscal year, which ended in March. Nintendo reports its next quarterly earnings on Oct. 30.
Fils-Aime says he's confident that both the DS and Wii will do well even in a depressed U.S. economy. "The video game industry has weathered recessionary times fairly well," he notes. "I think a $130 DS as the big holiday gift for a child is something a parent can feel good about." Nintendo will debut more than 200 games for both gaming platforms this fall, such as Personal Trainer Cooking for the DS and Ubisoft's Rayman Raving Rabbids TV Party for the Wii.
"If we get into unchartered territories with stocks coming severely down and unemployment spikes, then all bets are off," he added.
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