Back-to-back, Target posted a gain after the holiday season, reporting that its fourth-quarter earnings were up, with a revenue of $22.98 billion, above expectations of $22.96 billion, while Hewlett Packard posted the company’s supply revenue down 3% year-over-year, a situation that was a surprise to Wall Street, which had been expecting a 3% gain.

In addition to the good earnings news at Target, the company’s same-store sales were up 5.3% for that period.  So, it appears that Target has found its stride, after the downturns during its recent past investments in store remodelings and in generating e-commerce capacity.  Three-quarters of its online purchases were fulfilled by stores and online sales were up 31%, which marks the company’s fifth year in a row of digital sales growth that exceed 25%.  (As a point of comparison, Walmart logged a 43% surge in online sales, but that was seen as extraordinary.)

Hewlett Packard (HP) on the other hand is a company that is in somewhat of a free-fall.  Company managers blamed the current failings on emerging markets, where inventories were built up because the company had some faulty assumptions about its market share.  HP’s managers have indicated that they plan to remedy the situation by reducing inventory to improve pricing, but also said that there was a need to enhance the business management system in order to “improve the quality of our input.”  Hunh – ?  It appears that they’re trying to say, in double-speak, that they are currently searching for the  actual reasons for why things turned out as they did.  The shortfall occurred primarily in the company’s printing supply segment.  Print supplies typically make up less than one-quarter of HP’s overall revenue (ref. WSJ), but this segment has an outsized effect on the company’s bottom line because of the profitability of margins of the print supplies unit.  HP’s supplies carry margins between 40-50%, compared to low single-digit margins for its PC business.  The company has improved the print business over the past two years, but printing supplies have experienced decline over the last decade because of the greater use of mobile electronics and changes in business work practices that have ceased to dictate that any and everything is to be printed – remember, the paperless revolution.  Add to this, the introduction of the iPad, in 2010, and one comes to realize why HP’s supply revenue has fallen from $17 billion to around $13 billion annually.  It seems that HP is planning on managing its way out of this dilemma, following on its earlier success in making improvements to inventory management and pricing in its supply business.  Time will tell whether one more bit of tinkering will do the trick.

But, definitely something to keep in mind: ALL THE MOVING PARTS, moving together, will be necessary to allow HP to up-end its downturn.

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