Sony Group Corp. raised its full-year outlook for sales and profit after its media divisions outperformed, suggesting resilient consumer spending and a weaker yen is stabilizing the business.
The Japanese electronics and entertainment giant is targeting net sales of ¥12.4 trillion ($82.1 billion) in fiscal 2024, up from ¥12.2 trillion and better than estimated. It stuck with an existing forecast for operating income of ¥1.17 trillion. Notably, its prediction for music and gaming profit both surpassed analysts’ expectations.
The weaker yen may have played a role in propping up the numbers, given Sony’s globe-spanning business. The conglomerate continues to grapple with an uncertain global economic climate. Price discounts likely propelled sales of the marquee PS5 gaming console, reversing a slowdown in growth that emerged during the June quarter. Sony is launching a slimmer version of the device this Friday with a goal of riding sales momentum into the year-end holiday season.
The discounting is weighing on margins and may force Chief Operating Officer Hiroki Totoki, who began to oversee the PlayStation business last month, to implement cost-cutting measures. Already, Sony is decreasing staff at some of its major studios. Sony on Thursday reported a less-than-projected ¥263.01 billion operating income for the September quarter.
“The result is overall a tad weak. It raised the fiscal outlook, but since operating profit remained unchanged, the outlook hike was due mostly to a weak yen,” said Kazunori Ito, equity research director at Morningstar.
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Ito said he’d expected a better performance at Sony’s other major pillar, the smartphone image sensors it supplies Apple Inc. and Samsung Electronics Co. That division is grappling with stubbornly weak demand, while Apple’s disappointing holiday-quarter outlook revived concerns around the reception for the iPhone 15, particularly in China.
What Bloomberg Intelligence Says
Sales of image sensors could recover sequentially in 2Q, boosting operating profit, but that might be partly offset by costs related to ramping up production. Longer term, Sony is beefing up capacity to try and take more than a 60% share of the image sensor market by fiscal 2025 in terms of value. The Japanese government has actively provided subsidies to chipmakers, suggesting Sony may get help adding manufacturing lines.
- Masahiro Wakasugi, analyst
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Sony’s music business is benefiting from a shift toward streaming, which has remained resilient during an economic downturn. The Japanese conglomerate is investing for a stronger presence in India, the world’s most populous country, where entertainment spending is expected to surge alongside rising incomes.
On the movie front, Sony is adding to its roster of game film adaptations by teaming with Nintendo Co. on a live-action Legend of Zelda. Nintendo’s Super Mario film became one of the year’s highest-grossing movies, fueling expectations for Zelda.
(Updates with music outlook and analyst’s comment from the first paragraph)