The trade dispute with China continued to weigh on investor sentiment Wednesday, with the Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) losing close to 1%. All sectors were down, but utilities were the weakest.
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As for individual stocks, shares of Workday (NASDAQ: WDAY) fell in the wake of its latest earnings report, while Abercrombie & Fitch (NYSE: ANF) got crushed after issuing a weak outlook.
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Workday continues its rapid growth
Workday, maker of human capital and finance software, announced better-than-expected results for the first quarter of its 2020 fiscal year, but shares slumped 4.5%. Revenue grew 33.4% to $825.1 million, compared with Wall Street expectations of $814 million. The company lost $0.52 per share compared with a per-share loss of $0.35 in the period a year earlier. Excluding some amortization costs and large expenses related to share-based compensation, the company earned $0.43 per share, exceeding the $0.41 analyst consensus.
Subscription revenue, which accounted for 85% of the total, grew 34%, and revenue from professional services jumped 29%. Workday's subscription backlog increased 30% to $6.8 billion. Operating cash flow rose 14% to $209 million.
Looking forward, Workday expects full-year subscription revenue growth of 28%, compared with a range of 27%-28% the company forecast three months ago.
The cash flow growth may have been a little slower than investors wanted to see, but Workday explained on the conference call that collections are seasonal, and it still expects operating cash flow growth of 30% for the full year while it invests heavily in innovation.
Abercrombie & Fitch sees a weak quarter ahead
Shares of Abercrombie & Fitch got hammered, plunging 26.5% after the clothing retailer beat expectations for the first quarter but gave weak guidance. Net sales edged up 0.4% to $744 million and the company lost $0.29 per share, compared with an adjusted per-share loss of $0.56 in the period a year ago. Analysts were expecting a loss of $0.44 per share on sales of $734 million.
Companywide comparable sales grew 1%, with a 2% increase for the Hollister brand and 1% growth for the Abercrombie brand. International comparable sales fell 4% on a constant currency basis, while domestic comparable sales grew 4%.
Abercrombie expects flat comparable sales in Q2 and total net sales to be flat to up 2%, below the 2.9% growth analysts were expecting. The company said that mall traffic has been weak in May, and that the forecast does not account for the possibility of higher tariffs on Chinese goods presently under consideration by the Trump administration. Abercrombie is also closing three of its flagship stores through 2020, as the company said they were a drag on the top and bottom lines.
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