Starbucks announced the closure of hundreds of stores across the U.S. and Canada on Thursday, reassigning 900 non-retail employees to focus on a restructuring effort.
The company, based in Seattle, indicated that closures would begin soon, although it isn’t planning to sell many of the affected locations. By the end of its fiscal year on Sunday, it aims to have 18,300 North American stores, down from 18,734 as of June 29.
Employees will reportedly have options for transfers and retirement packages as available.
In a communication to staff, Starbucks Chairman and CEO Brian Nicole mentioned that evaluations of store performance highlighted locations lacking a clear path to financial viability or failing to meet customer expectations. Consequently, those stores will be closed.
“Every year, we open and close coffee houses for a variety of reasons, ranging from financial performance to other factors,” Nicole wrote. “This action is crucial for recognizing our influence on partners and customers. Closing a store is never an easy decision.”
The company is anticipated to allocate $1 billion for restructuring efforts, with $150 million dedicated to employee separation benefits and $850 million for costs related to store closures and lease terminations.
On Thursday morning, Starbucks’ stock saw a decline of less than 1%.
The extent to which the closures were planned remains unclear. Employees at Starbucks locations, operated by 650 franchises, have been voting to unionize since 2021, though a contract agreement with the company is still pending.
A labor organization representing Starbucks workers claimed the closures occurred without input from the baristas. The union aims to negotiate employment opportunities at closed stores for workers who wish to be reassigned.
“Addressing issues at Starbucks requires attention to the employees who engage with customers daily,” the union stated.
This news of store closures follows a recent lawsuit by union members from three states regarding a new dress code.
Starbucks clarified that the criteria for store closures did not involve union representation.
It’s unusual for Starbucks to decrease its number of locations in a fiscal year.
Looking ahead, Nicole expressed plans to expand Starbucks operations in North America in the upcoming fiscal year. The company also aims to redesign over 1,000 stores within the next year to create a warmer atmosphere for customers.
This is not the first round of significant layoffs at Starbucks this year; in February, Nicole announced job cuts impacting 1,100 corporate positions globally, with hundreds of openings being eliminated. He emphasized the need for operational efficiency and accountability in decision-making.
Nicole took over leadership of Starbucks just a year ago, after previously revitalizing Chipotle, effectively doubling its revenues and profits during his tenure there.
In July, Starbucks disclosed its sixth consecutive quarter of declining same-store sales, attributed to weakened customer traffic in the U.S. Niccol is working on strategies to improve this situation by increasing staff, enhancing store ambiance, fulfilling orders more efficiently, and implementing software designed to ensure customers receive their drinks within four minutes.
