Starbucks Corp. on Thursday announced it will close stores and eliminate 900 positions as part of a $1 billion restructuring initiative aimed at revitalising the coffee chain under Chief Executive Officer Brian Niccol.
The company said its overall store count in the US and Canada will decline by roughly 1% during fiscal 2025, ending the year with 18,300 locations.
Following the closures, Starbucks plans to expand its footprint and refurbish an additional 1,000 stores to improve the customer experience.
Starbucks’ stock was up less than 1% in premarket trading on Thursday.
Details of Starbucks restructuring
Starbucks expects roughly $1 billion in costs tied to store closures, support organisation restructuring, and related activities, with about 90% of the charges stemming from its North America operations.
Most of these expenses are projected to hit fiscal year 2025.
The anticipated restructuring charges include roughly $150 million for employee separation benefits, $400 million for disposal and impairment of company-operated store assets, and $450 million mainly for accelerated amortisation of right-of-use lease assets and other lease costs from early store closures.
Around $400 million of the total will be non-cash charges related to asset impairments and disposals, while the remaining $600 million represents future cash outflows for employee separation benefits and lease exit costs.
Focus on profitability and customer experience
After reviewing its network of coffeehouses, Starbucks identified certain locations where profitability prospects were limited and decided to shutter those outlets.
The company intends to concentrate on stores that align with Niccol’s plan to create more inviting spaces.
“Early results from coffeehouse uplifts show customers visiting more often, staying longer and sharing positive feedback,” Niccol said in a letter to employees.
Niccol, who took over as CEO a year ago, is steering a turnaround following six consecutive quarters of same-store sales declines.
The strategy includes enhancements such as added seating and electrical outlets designed to encourage longer visits and more frequent customer engagement.
The turnaround plan
Starbucks is also simplifying its menu to reduce order complexity and wait times while introducing new items to cater to evolving consumer tastes.
The chain has increased sugar-free options and launched protein-infused beverages to meet growing demand for healthier choices.
Despite these efforts, financial results have yet to show a meaningful impact.
The company’s most recent quarterly report fell short of expectations for both sales and profits.
However, some analysts have continued to remain bullish on the stock.
Baird upgraded Starbucks to outperform from neutral and raised its price target by $15 to $115.
The firm cited a strong conviction that the company’s turnaround strategies under new leadership will successfully transform operations, noting that clarity on these outcomes should emerge over the next several quarters.
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