Nintendo slashes Wii U sales forecast from 9m to 2.8m - and predicts losses

Games also selling poorly as slow Christmas sales hit margins at parent

Nintendo's Wii U has sold slowly and forecasts for sales have been slashed. Photograph: YURIKO NAKAO/REUTERS

Nintendo's Wii U console is looking like a flop. The Japanese games company has dramatically slashed the number that it expects to sell in the 12 months to the end of March from 9m to just 2.8m in a restated financial forecast (PDF) issued on Friday morning which also warns that it will fall into an operating and net loss for the year, instead of a forecast profit.

Overall, the company has cut its forecast sales by a third, from 920 billion yen (£5.4bn) to 590bn, and says it expects that it will make an operating loss of 35bn yen rather than a profit of 100bn. It had forecast a 55bn net profit - but now says it will make a 25bn yen loss.

The correction comes with almost a third of the financial year yet to come and marks the depths of the problems facing the company after a poor reception for its followup to the bestselling Wii console, and the success of rivals Sony with its new PlayStation 4 and Microsoft with its Xbox One. Both of those, launched ahead of the Christmas season, have sold millions - easily outstripping the Wii U.

Nintendo blamed disappointing sales of its consoles during the Christmas period, which is the biggest buying season for games and consoles: "software sales with a relatively high margins were significantly lower than our original forecasts, mainly due to the fact that hardware sales did not reach their expected level," it said in the statement.

It also halved the number of games that it expects to sell for the Wii U, from 38m to 19m.

The 3DS handheld console is also expected to sell in lower numbers, with the forecast cutting year-long sales from 1.8m to 1.35m, and games for it from 80m to 66m. Its Wii console, which is still on sale, saw a revised forecast from 2m to 1.2m, though it expects to sell more games - 26m rather than 20m.

The Wii U has failed to grab the imagination of buyers. Launched in 2012, it sold 3.45m in its first year. But its format - offering a tablet that connects to a Wii-style console - has created a challenge for games developers, who have struggled to find compelling ways to produce games that people want but which require the Wii U rather than the Wii.