Starbucks, SBUX, will close hundreds of stores this month and will lay off staff at its headquarters
Starbucks is taking what CEO Brian Niccol called “significant action” to address its faltering performance, announcing the closure of hundreds of cafés and a new round of corporate layoffs as part of a sweeping turnaround plan.
Niccol said Thursday the company will shutter about 1% of its stores—hundreds of locations—by the end of September. Starbucks reported 18,734 North American cafés at the close of June and expects to finish the month with roughly 18,300.
The restructuring is projected to cost $1 billion. Shares of Starbucks (SBUX) were little changed in premarket trading following the announcement.
In a letter to employees, Niccol said the company had conducted a comprehensive review of its store footprint. Locations slated for closure, he explained, were ones “unable to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance.”
While Starbucks frequently closes underperforming cafés, Niccol emphasized that this initiative is broader in scale. “This is a more significant action that we understand will impact partners and customers. Our coffeehouses are centers of the community, and closing any location is difficult,” he wrote.
Despite the reductions, Starbucks said it will soon return to expansion mode, with plans to remodel more than 1,000 cafés. The refreshed design will feature warmer colors, cozier seating, and more charging outlets.
The company also announced another 900 corporate job cuts, in addition to the 1,000 positions eliminated in February. Affected employees will be notified Friday and provided with severance and support packages, while many open roles will be closed.
“I know these decisions impact our partners and their families, and we did not make them lightly,” Niccol said. “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 first year
Niccol, who took over at Starbucks a year ago, has struggled to reverse the company’s fortunes. Shares are down roughly 12% over the past year, and sales have not rebounded as hoped.
He has cut about 30% of menu items while adding trend-oriented offerings such as protein toppings and coconut water. Food options have also been refreshed with new croissants and baked goods.
Other changes have included café remodels, self-serve milk and sugar stations, doodles on cups, and a subtle rebrand back to “Starbucks Coffee Company” to reinforce its core identity.
But the shake-up has faced resistance. Some baristas have objected to uniform changes, even filing lawsuits, while others say certain new drinks are overly complex to prepare during peak hours, adding strain to already busy shifts.