The PC boom has busted and we're about to see the results before Black Friday

Fueled by the pandemic the personal computer boom is overso how will this affect demand and prices for computers and the retailers that sell them this holiday season?

A sense of the implications will be provided next week with results from PC maker Dell Technologies Inc.
Dell,
+0.67%

and HP Inc.
HPQ,
+0.17%
,
along with video conferencing platform Zoom Video Communications Inc.
ZM,
-1.15%

and electronics chain Best Buy Co Inc.
BBYA,
+2.88%

All of these companies will report amid signs of deep holiday discounts on items like clothing and electronics, as many customers — stuck at home in 2020 and 2021 — loaded up on laptops and other goods and turned Zoom into a digital conference room . But this year, decades-high inflation and a return to pre-pandemic spending on travel and in-person meetings have forced retailers and electronics makers to adjust to a world where more people are spending on essentials.

Computer shipments are down at rates not seen since at least the 1990s. Adobe
ADBE,
-2.06%

said online holiday electronics discounts up to 17%. For PCs, they ran as much as 10% less. TVs are also sold cheaper. Forecasts for the holiday season have an increase in sales is usually requiredaided by price increases and sustained demand despite these price increases.

In depth: The pandemic computer boom is over, but its legacy will live on

However, the results from Target
TGT,
+0.54%

on Wednesday missed big third-quarter earnings, and the major retailer said it was bracing for a possible decline in same-store sales in the fourth quarter, citing “weakening trends in sales and earnings that emerged late in the third quarter and continued into November.” Results from Walmart
wmt,
+1.51%

were almost the opposite, however, detailing earnings that beat by a wide margin and an elevated outlook for the full year.

Among smaller retailers, discounter Ross Stores Inc.
ROST,
+9.86%

raised its full-year profit forecast, citing sales momentum, but easier year-over-year comparisons are ahead. But Williams-Sonoma Inc.
WSM,
-6.15%

noted “macro uncertainty” and “increasingly inconsistent” demand.

This week in earnings

The companies report during a shortened, quieter week — thanks to Thanksgiving — and after recession fears have hovered for most of the year. With 94% of the S&P 500
SPX,
+0.48%

of companies that have already reported third-quarter results, only a dozen are set to post earnings next week.

But among that 94%, there are signs that recession worries may be easing after the economy grew in the third quarter and turned around after two quarters of decline.

FactSet senior analyst John Butters said in a report Thursday that 179 companies mentioned the term “recession” during third-quarter earnings calls. That’s still above the 10-year average, but below the 242 companies that mentioned a recession in the second quarter.

Previously: Executives seem pretty convinced that a recession is coming

Elsewhere on Monday, JM Smucker Co.
SJM,
+1.11%

— best known for Folgers and Jif — reported results after concerns about higher food prices and how much higher they can go. Life sciences electronics maker Agilent Technologies Inc.
ah
+1.21%

report the results on monday as well. Fast food chain Jack in the Box Inc.
JACK,

reports Tuesday. Deere & Co. Tractors and Construction Vehicles
DE,
+0.31%

reported on Wednesday, after growling manufacturing and supply chain but steady demand.

The calls to put on your calendar

Search for clothes, search for discounts: Urban Outfitters Inc.
URBN,
+2.44%

reported Monday, while Burlington Stores Inc.
BURL,
+4.63%
,
Nordstrom Inc.
J.W.N.
+1.71%

and the dollar store chain Dollar Tree Inc.
DLTR,
-0.21%

report on Tuesday.

A wave of markdowns at the clothing retailer, an attempt to clear inventory, could draw more consumers, but worries Wall Street analysts are focusing on margins and the bottom line. Still, some analysts said more and more younger shoppers feel their wardrobes are getting old, and say Nordstrom, whose customers tend to have more money, is best suited to “upcoming wardrobe renovation.

Meanwhile, clothing and home goods retailer Burlington will report after rival discounters Ross and TJX got a boost from investors this week.

See also: The holiday shopping season has a different challenge this year than last — and it could lead to some bargains

Ross CEO Barbara Rentler noted that rising prices have hurt lower-income consumers. But Jefferies analysts said Burlington and other discounters, which often buy merchandise that other retailers don’t want, could benefit from clearing inventory.

Meanwhile, Dollar Tree reports that more shoppers are looking for cheaper grocery options, yet food prices are rising. But Bank of America analysts said in a note last month that traffic data suggested a “slowdown” in results.

The numbers to watch

Trends in the demand for computers, electronics: Dell and HP have reported more job cuts in the tech industry, while Zoom is trying to add more features — like calendar and email features — to appeal to small businesses and adapt to the world of hybrid work.

The collapse of the PC boom hit Dell in the previous quarter reported in August, following sales of PCs at the company came in below grade. At the time, executives said that demand for PCs had declined and that “customers are taking a closer look at their needs given the uncertainty.”

Opinion: Tech profits are about to fall, and there’s no lifeline

However, some analysts have signaled that some degree of investor pessimism is already baked into share prices.

“We recognize the deteriorating fundamentals of the computing industry as well as the gradual slowdown in IT infrastructure. With that in mind, we believe the scale of the cuts last quarter made Dell less exposed to another round of material earnings revisions,” JPMorgan analysts said in a note. And while HP is experiencing similar pain, analysts said the share buyback could be a “bright spot.”

The results from HP and Dell could also have implications for Best Buy, which sells laptops, TVs, phones and other electronic devices.

“Recall that initial expectations for the year were that BBY would face pressure as it overcomes stimulus-fueled spending and broad demand for technology products and services,” Wedbush analysts said in a Friday note.

“However, the macro is more volatile than expected, with consumers facing significant inflationary pressures and lower income households making decisions to trade down in some categories such as TVs.”

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