The Wii maker posted a 43.2 billion Yen (£329m) loss in the year to 31 March, compared with a profit of 77.6 billion (£591m) Yen in 2011.
Sales dropped 36% year-on-year to 647.7 billion Yen (£4.9bn), particularly in Europe and the US, where the year end sales season was slower in comparison to previous years.
Nintendo decreased its advertising costs by 21.8 billion Yen year-on-year (£166m), favouring tactical sales activity over above the line campaigns.
The gaming company had hoped to get 3DS sales back on track to forecasted growth rates equal to that of its predecessor the DS, by engaging in a series of sales promotions.
It made a “significant” price cut to its hardware, releasing a number of software titles in quick succession, and engaging in a sales promotion drive called “Nintendo Direct”, which offered software line-ups to be purchased via the internet.
Nintendo says it hopes to cease selling the 3DS below manufacturing costs by the middle of this financial year.
The games company will also be releasing Wii successor Wii U at the end of the 2012 calendar year in Europe, America and Japan, as it looks to turn around its profit slump.
Nintendo forecasts it will post 20 billion Yen (£152m) profit for its current fiscal year on the back of sales of 820 billion Yen (£6.2bn). It is pinning its hopes on the Wii U and 3DS to be the main drivers of sales growth, while Wii sales are predicted to tumble 90%.