Shares in Starbucks Corporation were trading 1.18% lower overnight after the coffeehouse chain revealed plans to close hundreds of U.S. and Canadian stores and lay off 900 non-retail employees as it focuses on a US$1 billion (A$1.52 billion) restructuring turnaround.
This latest round of layoffs follows the sacking of 1,100 corporate workers earlier this year, with Starbucks ending 2024 with around 16,000 employees who work outside store locations.
The number of company-operated stores in North America will decline by about 1% in FY25, which is expected to translate to roughly 500 gross closures.
The company expects to incur around $150 million in employee separation costs, plus around $850 million in restructuring charges related to the store closures.
The company said it had reviewed and identified stores where it would be “unable to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance”.
While Starbucks plans to start growing its footprint again in FY26 as part of CEO Brian Niccol’s “Back to Starbucks” transformation, the company plans to end FY25 with almost 18,300 North American locations, including both company-operated and licensed cafes.
The company had previously flagged to the market that it would be slowing new openings in favour of remodelling existing locations this year.
Renovated cafes are meant to encourage customers to linger, taking the coffee chain back to its roots as a “third place” for consumers, outside of home and the office.
Niccol’s plans to prioritise investment “closer to the coffeehouse and the customer” are expected to reverse a sales slump in the company’s biggest market, with same-store sales having fallen for six straight quarters.
Niccol attributes the recent sales slump to increased competition and price-conscious consumers.
“These steps are to reinforce what we see is working and prioritise our resources against them,” Niccol wrote in a letter to employees on Thursday.
“I believe these steps are necessary to build a better, stronger, and more resilient Starbucks that deepens its impact on the world and creates more opportunities for our partners, suppliers, and the communities we serve.”
Niccol’s recently announced “Back to Starbucks” transformation follows the company’s biggest investment ever into labour and operating standards in July, “Green Apron Service,” which involves a more than US$500 million investment in labour hours across company-owned cafes in the next year.
“I really hope we’re moving towards being the world’s greatest customer service company, [and] the world’s greatest customer-centric company,” Niccol told media earlier this month.
In addition to focusing on the customer experience, Niccol has enacted additional changes to operations, including a return to four days in the office, beginning next month.
Alongside the restructuring, management announced a 2% pay rise for salaried staff in North America.
Meantime, while closures in North America are dominating the headlines, Starbucks has invited bids from global investors, including Carlyle, EQT, and Tencent, for a controlling stake in its China business, valued at up to US$5 billion.
