HP Stockpiles Products Ahead of Potential Tariffs
In response to concerns over potential tariffs, HP Inc. (HPQ) has increased its product inventory. CEO Enrique Lores revealed this strategy at the World Economic Forum in Davos, Switzerland, stating that the company has primarily stockpiled finished products to mitigate the initial impact.
The move aligns with similar actions taken by whiskey giant Suntory, which has built a substantial European liquor reserve. HP's strategy reflects its dependence on sales in China and its reliance on the country for component sourcing. Higher tariffs could escalate material costs and necessitate price increases for consumers.
Recent estimates from the Consumer Technology Association suggest that proposed tariffs could raise laptop and tablet prices by up to 46%. Smartphones could face a 26% price increase. Trump has proposed tariffs ranging from 10% to 20% on most imports and 60% on Chinese imports.
In recent quarters, HP has reported mixed results. Consumer PC sales declined by 4%, while commercial sales grew by 5%. The company's PC division saw a significant drop in operating margins. Similar to the previous quarter, commercial clients are upgrading their computers before Microsoft ends support for Windows 10 in 2025. Consumer PC sales are facing pressure as customers anticipate new AI computer releases and allocate more funds to experiences.
JPMorgan analyst Samik Chatterjee noted that the competitive pricing dynamics pose challenges for HPQ as it attempts to recover higher memory costs.