Starbucks to Close Hundreds of Coffee Shops, Lay Off 900 Workers, CEO Says. Here’s Why.

The Seattle-based coffee chain is entering the second year of a turnaround plan. (Scott Olson/Getty Images)

Key Points

About This Summary

• Starbucks is closing an unspecified number of coffee shops in the U.S. and Canada, aiming for fewer than 18,300 locations by fiscal year-end.
• The company is eliminating approximately 900 non-retail corporate positions as part of a strategy to reduce expenses and reinvest in store operations.
• The actions are part of CEO Brian Niccol’s turnaround plan.

Starbucks is closing hundreds of coffee shops in the U.S. and Canada and laying off 900 corporate employees as part of a $1 billion restructuring, the company announced Thursday.

The company didn’t provide details on how many stores would close but said it will finish its fiscal year, which ends next Tuesday, with less than 18,300 locations in the U.S. and Canada. Starbucks had 18,734 locations as of June 29.

“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,” CEO Brian Niccol wrote in an open letter.

The Seattle-based company will notify staff at impacted shops this week and will attempt to offer transfers to nearby locations where possible, the chief executive added.

Starbucks also will eliminate around 900 non-retail jobs, as it attempts to shave expenses and invest more in coffee shop staffing and redesigns, Niccol said. Workers will find out their status Friday morning, he added, requesting that employees work from home the next two days.

Store closure costs and other restructuring expenses, including severance packages, will total around $1 billion, Starbucks said in a regulatory filing.

The moves come as Niccol, the former Chipotle Mexican Grill CEO, embarks on the second year of his turnaround plan. The executive has focused on improving customers’ in-store experience and revamping the menu, but sales and profit margins still showed weakness last quarter.

“These steps are to reinforce what we see is working and prioritize our resources against them,” Niccol wrote. “Early results from coffeehouse uplifts show customers visiting more often, staying longer, and sharing positive feedback.”

Investors largely shrugged off the announcements Thursday, with Starbucks down 0.5%. Shares have fallen 7.7% this year as of Wednesday’s close.

Write to Nate Wolf at nate.wolf@barrons.com