HP Reports Drop In Printer Supplies Revenue As Commercial Sales Shift Online

HP Inc. reported a surprise drop in revenue for its printer supplies business during its latest quarter, which CEO Dion Weisler attributed to sales shifting online among commercial customers.

For HP's first fiscal quarter of 2019, which ended Jan. 31, print supplies revenue dropped 3 percent from the same period in 2018. And the company said to expect a roughly 3 percent decline in supplies revenue for the rest of the fiscal year.

[Related: HP Will Move 'Thousands' Of Managed Print Services Accounts To Partners]

"More commercial customers are purchasing supplies online. And while we have leading share online, it's at a lower percentage than our share with traditional commercial resellers and in-store retailers," Weisler said Wednesday during the company's quarterly conference call with analysts.

"The omni-channel and the consumer preferences to buy online are definitely not new," Weisler said. "What we've seen is more commercial customers purchasing online."

HP is "taking action" in the supplies business including through additional targeted marketing and lowering its supplies inventory, he said.

HP's stock price fell 10 percent in after-hours trading Wednesday to $21.35, and was down another 6.5 percent Thursday, to $19.95, shortly after the market opened.

Weisler said that HP had "incorrect supply share assumptions," which made it "difficult" to see the change in buying behavior during the company's fiscal first quarter.

Even among businesses, "online procurement is becoming more of the norm," said Michael Cass, partner and director of business technology for midmarket office at Bannockburn, Ill.-based Netrix, No. 189 on the 2018 CRN Solution Provider 500. "They're more comfortable with it than they ever have been before."

That has extended to peripherals such as printer supplies, where some customers don't feel like they need the expertise of an adviser, Cass said.

"It means companies like us need to pivot and continue to drive value where it's more appropriate," Cass said. "To compete with that, companies like us are bringing similar online marketplaces to our customers, with access to our distributors, for quick, up-to-date market pricing."

Ultimately, "in order to stay relevant in the market, companies like Netrix need to develop those online portals," he said.

For its fiscal first quarter, HP reported that revenue in its print segment was essentially flat year over year at $5.06 billion in fiscal first quarter, compared with $5.08 billion a year earlier.

Net earnings during HP's first fiscal quarter came in at $803 million, or 51 cents per diluted share—down from $1.94 billion, or $1.16 per diluted share, during the same period a year earlier. Revenue for the quarter rose 1.3 percent, to $14.71 billion, from $14.51 billion a year ago.