Starbucks to shut stores, slash jobs in $1B restructuring plan
What's the story
Starbucks has announced a major restructuring plan that will see the closure of some stores and the elimination of around 900 jobs. The move comes as part of a $1 billion effort to turn around the company's fortunes under new CEO Brian Niccol. The company plans to reduce its overall store count by 1% in fiscal year 2025, ending with a total of 18,300 locations across the US and Canada.
Strategy shift
Identifying unprofitable locations for closure
The coffee giant has identified several locations where profitability seems unattainable and plans to shut them down. The move is part of a broader strategy to focus on stores that fit Niccol's vision of making its restaurants more inviting. "Early results from coffeehouse uplifts show customers visiting more often, staying longer and sharing positive feedback," Niccol said in a letter to employees on Thursday.
Turnaround efforts
Niccol's turnaround plan in progress
Niccol, who is leading the company through a turnaround after six consecutive quarters of same-store sales declines, has a plan that involves revamping locations by adding seating and electrical outlets to encourage longer visits. However, these changes have not yet significantly impacted Starbucks's financial performance, prompting the second round of layoffs under Niccol's leadership.
Market challenges
Starbucks facing tough competition from smaller chains
Starbucks's latest fiscal third-quarter sales and profits fell short of expectations. The company is also facing stiff competition from smaller chains in the US and China, its two largest markets. These rivals are serving cheaper beverages to customers at a faster rate. To combat this, Starbucks is simplifying its menu to reduce drink complexity and accommodate new items that better match changing consumer tastes.