Starbucks said Thursday it would close underperforming stores in North America, including its iconic Seattle roastery, as CEO Brian Niccol presses ahead with his $1 billion restructuring effort to revive the company’s flagging sales.
The coffee chain’s overall US and Canada store count is expected to drop by 1%, or several hundred stores, by the end of the 2025 fiscal year. Niccol is trying to restore the chain’s “coffeehouse” feel to bring customers back to its outlets after six consecutive quarters of declining US sales.
Among the closed stores was Starbucks’ flagship unionized location in Seattle, a large cafe with an in-house roastery, the company confirmed.
Talks between Starbucks and the Workers United union, which represents over 12,000 baristas, began last April, but have hit a wall since.
In December, some members of the union walked off their jobs in multiple US cities in a strike that spanned several days during the peak holiday season.
Workers at the Seattle store, which is located near its headquarters, voted to unionize in 2022, and the union picketed the store on Monday over contract negotiation disputes.
A unionized store in Chicago, on Ridge Avenue, was also closed, the union confirmed. Baristas at the store were picketing Thursday morning, in a plan made before the store’s closure was known, the union said.
A Starbucks spokesperson said the union status of stores was “not a factor in the decision-making process.”
Starbucks Workers United criticized the closures in a statement. “It has never been more clear why baristas at Starbucks need the backing of a union,” the union said, adding that it planned to bargain for affected workers so they could be transferred to other stores.
Analysts at TD Cowen estimate that about 500 North America company-owned stores were impacted by the restructuring.
Niccol’s revamp attempt
In his first year on the job, Niccol has zeroed in on investing in Starbucks’ stores to reduce service times and restore a coffee-house environment, while also trimming management layers.
The company has posted six straight quarters of sales decline in the US as demand for its pricey lattes took a hit from consumers turning picky and competition ramping up.
“During the review, we identified coffeehouses where we’re unable to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance, and these locations will be closed,” Niccol said in a letter to employees.
The CEO said the company would end the fiscal year with nearly 18,300 total Starbucks locations – company operated and licensed – across the US and Canada.
This compares to the 18,734 locations disclosed in a July regulatory filing. The company expects a majority of the store closures to be completed by the end of this fiscal year, taking its company-operated store count in North America down by about 1%.
Investing in quicker service
Niccol has enjoyed the confidence of investors since taking over after his leadership at Chipotle Mexican Grill where he is credited with leading a turnaround at the burrito chain.
“Starbucks is taking more aggressive actions within turnaround efforts. The store closures are more than we anticipated while we believe the layoffs fit within management’s previously announced zero-based budgeting framework,” TD Cowen analyst Andrew Charles said.
Starbucks said Thursday the 900 job cuts would be in its support teams and added the company would also close many open positions.
The company employed about 10,000 people in non-coffee-house roles in the US, as of Sept. 29, 2024.
“This is a more significant action that we understand will impact partners and customers,” Niccol said.
At the same time, Starbucks is investing to improve staffing and incorporate technology to more efficiently sequence orders at its coffee shops and enhance customer experience.
The company said earlier this year it would eliminate 1,100 corporate roles.
In August, it also announced a modest 2% hike to all salaried employees in North America this year.
Starbucks shares were down marginally in afternoon trading.
They have risen about 9% since Niccol took over in August 2024.
Credit: Source link
