Traders betting against Chipotle made $260 million in a single day on its earnings disaster

  • Chipotle totally whiffed on third-quarter earnings, while also cutting its full-year 2017 profit forecast.
  • Short sellers made more than $US260 million as the company’s stock dropped as much as 16%.

There was at least one winner following Chipotle‘s disastrous earnings report: traders betting against the company.

They raked in roughly $US260 million in mark-to-market profit as the company’s stock plunged as much as 16%, according to data compiled by the financial analytics firm S3 Partners.

The drop came after Chipotle not only whiffed on analyst estimates for third quarter earnings, but also slashed its full-year outlook, including a major cut to projected same-store sales growth. The Mexican fast-casual chain blamed four main reasons for its quarterly miss: hurricanes, store closures, hackers and “historically high avocado costs.”

Short sellers have now made $US303 million wagering on Chipotle stock price weakness this year, S3 data show. That means the company’s earnings-day selloff has accounted for 86% of the traders’ year-to-date windfall.

And it’s safe to say Chipotle bears saw at least some stock damage coming ahead of time. They boosted their exposure by $US238 million, or 16%, in the month of October.

Now Chipotle sits as the least popular company in the US restaurant sector, with a whopping $US1.8 billion of short interest — or a measure of wagers that a share price will drop. Rounding out the top five most shorted restaurant stocks are Starbucks ($US1.5 billion), McDonald’s ($US1.3 billion), Domino’s Pizza ($US987 million) and Darden Restaurant ($US630 million), according to S3.

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