:max_bytes(150000):strip_icc()/GettyImages-2191755370-ebf6a3fa4bf5463e9ea2b0327ad0599c.jpg "Starbucks Is Closing Shops and Cutting Costs as Its Turnaround Effort Continues")
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Key Takeaways
- Starbucks is closing dozens of outposts it says won’t mesh with a turnaround strategy it launched last September.
- The company is also laying off 900 white-collar employees so it can cut costs and put resources toward “key areas that drive long-term growth,” CEO Brian Niccol said.
A year into its turnaround attempt, Starbucks says its strategy won’t work in dozens of its locations—which are now set to close.
Starbucks (SBUX) is shutting cafes where it’s “unable to create the physical environment our customers and partners expect” or make the finances work, CEO Brian Niccol said in a letter Thursday that was published online. The Seattle-based coffee chain will end its fiscal year in the coming days with 18,300 American and Canadian outposts, 1% fewer than a year earlier, the letter said, though it expects to finish the coming year with more.
Starbucks is also laying off 900 non-retail employees to cut costs and put resources toward “key areas that drive long-term growth,” Niccol said.
Niccol last year announced Back to Starbucks, an attempt to improve sales by making cafes a more enticing place to spend time and money. Starbucks sought to serve to-go customers within four minutes and bring order to cafe lines. Cafes would also become more inviting due to new seating, the return of ceramic dishes and free refills, the company said.
Why This Matters For Starbucks Investors
A recovery at Starbucks may take some time, given that the company is cutting costs to sustain its new approach one year in. Starbucks is betting customers long for the days when cafes functioned as a place to hang out, but competitors have found success with models focused on drive-thrus and quick turnover.
Niccol said there are signs the strategy is working. Customers visited revamped stores more and stayed longer, he wrote. Transactions and sales have grown at locations where Starbucks assigned more staff during busy periods, he said.
Still, same-store sales have been negative and store earnings have fallen year-over-year for the past six quarters, according to Visible Alpha. Starbucks has also recently struggled in China, where it is considering selling a stake in the business.
Investors welcomed Niccol’s appointment to the CEO job. Shares shot up 22% when the company announced his hiring last August. Many were optimistic he would help Starbucks mount a comeback, as he did at Chipotle Mexican Grill (CMG) in the wake of an e coli outbreak.
Expectations appear to have been tempered. Shares of Starbucks remain above where they were before Niccol took over, but they have fallen nearly 13% over the past year and about 9% in 2025.
