Starbucks to Close Underperforming Stores, Cut 900 Jobs in $1 Billion Overhaul

Starbucks announced on Thursday that it will close hundreds of stores across the US, Canada, and Europe while laying off 900 nonretail employees as part of a major $1 billion restructuring plan.

This move is part of the company's effort to focus resources on its turnaround under CEO Brian Niccol.

According to AP News, the closures will begin immediately, with the company expecting to have about 18,300 North American locations by the end of its fiscal year—down from 18,734 stores as of June 29.

TD Cowen analyst Andrew Charles estimates around 500 stores will close in North America during the fourth fiscal quarter.

Starbucks did not specify how many locations in Europe will close, but CEO Niccol mentioned some stores in the UK, Austria, and Switzerland will be affected.

Baristas at closing stores will be offered severance packages or transfers to nearby locations where possible.

Niccol wrote in a letter to employees that the closures come after a careful review identifying stores with no clear path to financial stability or unable to meet the company's expected customer environment.

"Each year, we open and close coffeehouses for a variety of reasons, from financial performance to lease expirations," Niccol said. "This is a more significant action that we understand will impact partners and customers."

Starbucks Shares Dip 1% Amid Restructuring Announcement

The restructuring will cost Starbucks about $1 billion, including $150 million for employee separation benefits and $850 million related to store closures and lease exits. Most expenses will hit in fiscal 2025.

Starbucks shares fell slightly following the news, down about 1% in afternoon trading. The company's stock has dropped more than 8% this year as sales continue to slip, CNBC reported.

This is the second round of layoffs under Niccol, who took over a year ago. In February, Starbucks cut 1,100 corporate jobs and eliminated several hundred open positions to improve efficiency and accountability.

Starbucks has faced six straight quarters of declining same-store sales, largely due to weak US traffic and rising competition. Niccol's turnaround strategy includes making stores more welcoming and improving service.

The company plans to redesign over 1,000 locations in the next year to create a warmer, more inviting atmosphere.

Niccol emphasized the company's focus on people in the turnaround plan: "These steps are to reinforce what we see is working and prioritize our resources against them. I believe these steps are necessary to build a better, stronger, and more resilient Starbucks."

Originally published on vcpost.com