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Starbucks will close hundreds of North American coffee shops and lay off a further 900 workers in corporate offices this week as it attempts to turn around flagging sales.
The company will incur $1bn in costs related to the cuts, including employee severance payments and expenses related to exiting leases, Starbucks said on Thursday.
The world’s largest coffee shop chain has reported six consecutive quarters of falling same-store sales as consumers have balked at its prices and expressed frustration over queues to pick up orders.
Brian Niccol, chief executive for the past year, has been aiming to turn around the business by improving service and upgrading café decor. But Starbucks’s share price is lower than a year ago.
It had 18,424 cafés in North America at the end of the last financial year in September 2024, and had increased the total to 18,734 at the end of its third quarter in June. The majority are company-operated stores where baristas are Starbucks employees.
After the new closures, Starbucks would have almost 18,300 locations in North America by the end of this month, it said.
In a note to employees, Niccol said management had “identified coffee houses 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, and these locations will be closed”.
The reductions to Starbucks’s corporate headcount are the second big round of job cuts this year. The Seattle-based company axed 1,100 positions in February. As with earlier announcements, Starbucks instructed office workers to work from home on Thursday and Friday as it notifies those employees who will be losing their jobs.
Starbucks declined to enumerate the jobs lost at closed stores. The average store employed 18 to 19 people, chief operating officer Mike Grams said in June, but the company has been increasing rosters to improve service.
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Niccol said that Starbucks would offer to transfer baristas from shuttered coffee shops to other stores nearby “where possible”, and provide severance packages to others.
With a barista turnover rate of almost 50 per cent a year in North America, Starbucks annually hires tens of thousands of new baristas.
Niccol said Starbucks would grow its company-operated store count in the coming fiscal year. “We also hope to welcome many of these partners back to Starbucks in the future as new coffee houses open and the number of partners in each location grows,” he wrote.
Starbucks is the largest coffee shop chain in North America by far. Its closest rival by store count, Dunkin’, the coffee and doughnut chain backed by private equity firm Roark Capital, had almost 10,000 US locations at the end of 2024.
Starbucks is also facing intensifying competition from drive-through focused chains in the US, including Dutch Bros and 7 Brew.
Starbucks shares were up 0.2 per cent in pre-market trading on Thursday. They have shed 12 per cent in the past year.
