Sweetgreen's 25% Plunge: A Perfect Storm of Earnings Woes and Loyalty Program Fails

Summary
• Sweetgreen (SG) tumbles 25.3% to $9.325, its lowest since May 2023
• Q2 revenue misses estimates by 3.1%, same-store sales drop 7.6%
• CEO admits two-thirds of restaurants underperform, loyalty program transition blamed

Today’s catastrophic selloff in Sweetgreen reflects a confluence of operational missteps and macroeconomic headwinds. The stock’s intraday range from $8.80 to $10.00 underscores extreme volatility as investors flee a company now projecting 4-6% negative same-store sales for 2025. With the 52-week low at $8.80 nearly breached, the salad chain’s strategic pivot to SG Rewards has backfired spectacularly.

Earnings Miss and Loyalty Program Transition Spark Sharp Decline
Sweetgreen’s 25.3% collapse stems from a quadruple whammy: a 7.6% same-store sales drop in Q2, a $23.2M net loss, a 250-basis-point loyalty program headwind, and a 40-basis-point tariff-driven margin hit. CEO Jonathan Neman’s admission that only one-third of restaurants meet performance standards, coupled with a $700M–$715M revenue outlook (down from $740M–$760M in May), shattered investor confidence. The transition from Sweetgreen+ to SG Rewards directly caused a 250-basis-point drag on Q2 same-store sales, while labor costs surged to 27.5% of revenue.

Restaurants Sector Mixed as McDonald’s Drags Down Peers
While Sweetgreen’s 25.3% drop is extreme, the broader Restaurants sector shows mixed signals. McDonald’s (MCD), the sector leader, fell 0.62% intraday, reflecting broader consumer spending caution. Competitors like Chipotle and Outback Steakhouse face similar pressure from inflation and shifting consumer preferences, but none have triggered such a violent sell-off. Sweetgreen’s collapse is uniquely tied to its loyalty program fiasco and operational underperformance, not sector-wide trends.

Options Playbook: Capitalizing on Volatility with Strategic Puts and Calls
• RSI: 41.08 (oversold)
• MACD: -0.395 (bearish), Signal Line: -0.226
• Bollinger Bands: $11.40 (lower) vs. $9.325 (current)
• 200-day MA: $24.78 (far above)

The technicals scream short-term bearishness, with SG trading near its 52-week low. Key support at $8.80 (52W low) and resistance at $13.53 (200-day MA). The 73.65% implied volatility on the SG20250815P9 put and 62.07% on the SG20250822P9.5 put suggest market anticipation of further downside. For aggressive short-term bets, consider these two options:

• SG20250815P9 (Put): Strike $9, Expiry 8/15, IV 73.65%, Leverage 37.34%, Delta -0.345, Theta -0.005, Gamma 0.362, Turnover $25,961
- High leverage and moderate delta position this as a strong bearish play. If SG drops to $8.50, payoff = $0.50/share
• SG20250822P9.5 (Put): Strike $9.5, Expiry 8/22, IV 62.07%, Leverage 16.97%, Delta -0.525, Theta -0.0002, Gamma 0.339, Turnover $7,440
- Strong delta and gamma make this ideal for a 5% downside scenario. Payoff at $8.50 = $1.00/share

Aggressive bears should prioritize the SG20250815P9 for its 37.34% leverage and high gamma. For a longer-term play, the SG20250829P9.5 put offers 204% potential return if the stock breaks below $9.00.

Backtest Sweetgreen Stock Performance
The backtest of SG's performance after a -26% intraday plunge shows mixed results. While the 3-day win rate is 49.61%, the 10-day win rate is 52.75%, and the 30-day win rate is 51.18%, indicating a higher probability of positive returns in the short term. However, the maximum return during the backtest period was only 9.70%, which suggests that while there is a good chance of recovery, the potential upside is limited.

Urgent Action Required: Navigating Sweetgreen's Turbulent Outlook
Sweetgreen’s 25.3% plunge signals a breakdown in investor trust, with no immediate catalysts for recovery. The stock must hold above $8.80 to avoid a liquidity crisis, while a rebound above $13.53 (200-day MA) could reignite hope. Sector leader McDonald’s (-0.62%) hints at broader consumer caution, but Sweetgreen’s issues are uniquely self-inflicted. Investors should monitor the SG20250815P9 put for a 5% downside scenario and watch for a breakdown below $8.80. For now, the message is clear: Shorts tighten hedges, longs cut losses, and options traders capitalize on volatility.