Starbucks shuts 250 stores as turnaround continues
What's the story
Starbucks has announced its decision to close 250 stores across North America. The company said the affected locations either did not "deliver the experience we want for customers and partners" or were not financially viable. The closures will account for about 1% of Starbucks' total footprint of some 18,000 locations in the region.
Business overhaul
CEO's restructuring plan
The decision to close stores comes as part of a larger restructuring plan led by Starbucks CEO Brian Niccol.
Last year, Niccol had announced similar store closures and corporate layoffs as part of a $1 billion restructuring effort.
The plan is aimed at revamping the company's business model and driving growth. It includes cafe renovations, improved service, and a simplified menu in North America.
Cost impact
Financial impact of store closures
The upcoming store closures are expected to cost Starbucks around $300 million, according to a regulatory filing.
Of this, $200 million will be due to early lease termination and severance benefits for employees.
The company has not yet released a list of the affected stores, but customers will start seeing signs at these locations from this weekend onward.
Growth strategy
Future growth and expansion plans
Despite the store closures, Starbucks remains optimistic about future growth in North America.
COO Mike Grams said in a letter to employees that the company is "actively developing a strong pipeline of new coffeehouses" and remains committed to expansion.
However, the company's global expansion plans have been scaled down slightly, with only 440 new locations expected this fiscal year, down from an earlier estimate of 600-650 openings.
Sales growth
Return to sales growth
Starbucks has seen a return to sales growth, with same-store sales at US locations rising 7.9% in the last quarter.
The company has also been retrofitting its North American coffeehouses to make them more comfortable and inviting.
By September 30, some 1,500 stores are expected to have undergone these changes as part of the company's fiscal year-end efforts.