Surging Laptop Demand Helps Ease HP’s Pain From Weak Office Printing Sales

By Maria Armental

Hot demand for HP Inc. laptops as people work and learn remotely helped ease the hit from a 20% revenue drop in the office-equipment maker’s more profitable printing business during the coronavirus pandemic.

Laptop sales surged 30% in the July quarter from a year ago, helping HP limit its revenue drop to 2%, as the company reported $14.29 billion in sales, surpassing Wall Street’s projection of $13.34 billion. The decline was driven by the printer business, as well as lower sales of desktops and workstations, with companies investing less in office equipment as employees work from home.

The printing business — smaller by revenue than the computer business but typically more lucrative — saw sales fall to $3.93 billion, driven by lower sales of commercial printers and supplies.

The consumer printer market, though, was a bright spot, with people stuck at home buying devices. Chief Executive Enrique Lores said those sales should lift the printing business as people come back to buy more ink and other printing supplies.

Earlier this year, Mr. Lores warned the July quarter would be tougher than the preceding one for the company’s printing business as corporate customers curtailed spending on office equipment. “We couldn’t install many of the units that we had orders for,” he said at an industry event in May,

On Thursday, Mr. Lores said supply-chain challenges the company encountered during the pandemic hurt printer sales early in the quarter, particularly on the consumer end. But, the CEO said, the consumer printing business that saw revenue increase 7% in the quarter should strengthen. In addition, he said, commercial printing sales, while still down, were improving and supply-chain problems had subsided.

HP and fellow PC makers like Dell Technologies Inc. were expected to benefit from the demand surge during the pandemic. But the run on laptops has also created bottlenecks, with some school districts scrambling to equip students and staff have seen delayed shipments.

And sales of printers, particularly commercial models, have dropped amid budget cuts and government lockdowns to help curb the spread of Covid-19. Shipment of industrial printers declined 46.8% in the most recent quarter, research firm International Data Corp. said.

Xerox Holdings Corp., which last year launched an unsuccessful hostile takeover bid for HP, saying the printing industry was decades overdue for consolidation, reported its sales in the most recent quarter fell by more than a third from a year earlier and that it expected its core printing business to remain challenged.

HP said it expects to end the financial year with a profit of $1.83 to $1.87 a share, or $2.16 to $2.20 a share on an adjusted basis. Analysts’ projected $1.90 a share, or $2.11 a share as adjusted, according to FactSet.

Profit for the quarter ended July 31 fell 38% to $734 million, or 52 cents a share. On an adjusted basis, profit fell to 49 cents a share from 58 cents a share a year earlier. The results beat company and analysts’ projections, according to FactSet.

Write to Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

August 27, 2020 16:21 ET (20:21 GMT)