Nikon's Full Year Results

Nikon reported the same thing we've been seeing from the other camera companies: the January to March quarter was pretty miserable. Miserable enough that Nikon missed by 3% on revenue and profit on the already downgraded estimates they made not too long ago.

I'm going to cut to the chase: Nikon's forecast for the coming four quarters (their fiscal year). It's pretty dismal, too. ILC body sales go from 2.06m units to 1.6m, a decline of 22%. Lens sales go from 3.17m units to 2.6m, a decline of 18%. Compact cameras go from 1.6m units to 1m units, a decline of 37%. Simply put: Nikon is still in contraction mode. And Nikon projects the market to be in similar contraction, as well.

bythom nikon ilcquarterly

Nikon's Quarterly ILC Volume

This puts Nikon's market share at 18.8% for ILC, a historic low in the decades I've been following them. Lenses? 17.9%, also a historic low. Compacts? 16.7% market share, not exactly a historic low, but this market is really one where the last company standing will be left closing the door. 

In my other article today on Nikon's Management Goals, I note their emphasis on moving to mostly full frame. Nikon says that full frame sales have increased for two years in a row now, and I'd bet they think they can do that again. But given their projections for the year and other comments, that means that they're thinking the market defined by the D5, D750, D850, Z6, and Z7 are where they need to be putting their efforts.

The one "positive" note in the results is this: Nikon expects the second half of the coming year to be better than the first half (e.g. Oct 2019 to March 2020 compared to April to September 2019). That's in contrast to what has been happening recently, with second halves being worse than first halves. But that also means that Nikon is projecting April to September 2019 to be even more miserable (down from the last half of the past year). Implied in all of that is that any significant new product introductions happen in the August/September or later time frame.

Inventory piled up along the way, too. Imaging had a higher inventory at the end of March 2019 than in any year previous going back to 2016. That explains all the big sales going on right now. Also telling: revenue was down in imaging in Japan, the US, and Europe, and up in China and Others. 

So. More of the same. Unfortunately. If there's anyone left in Nikon's Tokyo offices that thinks that one day they'll best Canon, they're looking in the wrong direction. Sony is neck and neck with Nikon now in overall ILC, and going the opposite way Nikon is.

This all probably explains why virtually no Imaging business executives got promotions into the corporate offices this year. 

Thing is, Imaging was 41.8% of Nikon's sales during the past year, and projected to be 38.9% of sales in the coming year. Nikon cannot really afford to fail in Imaging. If the management team in Imaging isn't good enough to promote to corporate levels, then they have the wrong management team to start with. Worse, there's now almost no one in Nikon corporate management that has any experience with the customers that Imaging needs to win over. To make a change in results I believe Nikon needs to make changes in management. Otherwise we're just repeating the same story over and over.

Yes, this is a gloomy story. But please don't interpret it incorrectly. For the foreseeable future, Nikon isn't doing much different than they have been: they're tolerating contraction to emphasize fewer products on which they make high margins (e.g. full frame ILC). If full frame products are what you want from Nikon, then nothing has really changed. It's where almost all their R&D effort is focused, and we've continued to see full frame products of high interest and performance roll out for awhile now. That won't change.

It's for those you who aren't into full frame where Nikon is becoming concerning. I'd argue that if you don't do products that customers actually want, then you get bad results, and that's sort of what's happened with DX. The D7500 is a very good example. An excellent camera that was de-contented in ways that buyers noticed and objected to (missing second card slot, no AI index tab, etc.). Sure, it looked like it increased gross profit margin as Nikon took costs out of the camera. But look what happened: it didn't sell all that well, and now is been repriced dramatically lower.

I'm sure I don't have to mention buzz, buzz, but there's also just not been enough done to support those D7500 and D500 users on the lens side, either. Once you can no longer see the customer clearly, it's highly unlikely that you make products that will have any demand. That seems to me to describe DX pretty well now. (That said, I'll bet Nikon introduces some more DX products, only they'll be mirrorless. Let's hope they think through the customer need correctly this time, otherwise they should expect the same results.)

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