Why Chipotle Mexican Grill, Barnes & Noble, and Moneygram International Tumbled Today

Stocks finished close to unchanged as earnings reports from different sectors gave disparate reads on the state of corporate America; but these three stocks plunged. Find out why.

Apr 17, 2014 at 8:30PM
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Despite having a three-day weekend ahead of them, investors didn't appear to have much holiday spirit, as the stock market didn't stray too far from the flatline Thursday. A mix of positive and negative earnings reports largely kept broader markets mixed, but that didn't prevent some stocks from posting sharp losses as trading ended for the short week. Chipotle Mexican Grill (NYSE:CMG), Barnes & Noble (NYSE:BKS), and Moneygram International (NASDAQ:MGI) were all among the worst performers on the day.

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Chipotle Mexican Grill fell 6% after the fast-casual Mexican-food restaurant chain didn't live up to the high expectations of its investors. Although revenue jumped 24% on a 13.4% gain in same-store sales, earnings per share fell far short of what shareholders had wanted to see from the burrito giant. The big culprit: surging food costs, which climbed by more than a third. Although Chipotle accepted the hit to its operating margins during the first quarter, the company said that it would pass through those higher costs in the form of menu-price increases this quarter. Despite Chipotle Mexican Grill issuing higher same-store sales guidance for the remainder of the year, investors appear skeptical whether the company will be able to hold onto customers in light of higher prices.

Barnes & Noble dropped 12% after founder Leonard Riggio sold off a huge chunk of his holdings in the bookseller's shares. Riggio sold 3.7 million shares, raising about $70 million in the process. Even though that's a huge number, it represents less than a quarter of Riggio's position in Barnes & Noble, and he still owns about 20% of Barnes & Noble's outstanding shares. The ongoing deterioration of Barnes & Noble's business has been troubling to long-term shareholders, who are understandably jittery when major insider sales occur, and it's increasingly difficult to maintain confidence in Barnes & Noble even after Riggio's positive comments following his sale.

Moneygram International plunged 18% as retail giant Wal-Mart (NYSE:WMT) decided to offer a competing money-transfer business. With its Walmart-2-Walmart service, the retailer will offer transfers at price points of $4.50 and $9, depending on the size of the transaction, which is far less than what some competing services charge to provide similarly sized transfers. Moneygram will still retain its hold on Wal-Mart's international money-transfer business, as Walmart-2-Walmart will, at least initially, be available only for domestic transfers. Still, the move shows the vulnerability of having a business model with little or no barrier to entry, especially as electronic payment systems have gotten so much attention lately.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill. The Motley Fool owns shares of Barnes & Noble and Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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