Starbucks, a global coffeehouse giant, is embarking on a significant operational overhaul, announcing the closure of numerous underperforming locations and a substantial reduction in its corporate workforce. These strategic adjustments are part of a broader turnaround plan initiated a year ago, aimed at revitalizing the brand's market position and enhancing profitability. The company is re-evaluating its physical footprint and organizational structure to align with evolving customer expectations and to foster sustainable growth in a competitive landscape.
As part of its ongoing revitalization efforts, Starbucks is moving forward with a plan that includes the closure of multiple stores and the elimination of 900 non-retail positions. According to CEO Brian Niccol, these decisions are crucial for ensuring that the company’s cafes meet both customer expectations and financial viability. This initiative will result in a roughly 1% decrease in the total number of Starbucks outlets across the U.S. and Canada by the end of the fiscal year, though the company anticipates an overall increase in store count in the subsequent year.
The affected cafes are those identified as incompatible with Starbucks' long-term vision, focusing on creating an inviting environment and improving operational efficiency. The corporate layoffs are intended to streamline costs and redirect investments towards key areas that are projected to drive future expansion. This aligns with Niccol's "Back to Starbucks" program, launched last year, which emphasized improving in-store experiences, such as faster service times (targeting four minutes for to-go orders), more comfortable seating, the reintroduction of ceramic tableware, and free refills.
Despite these substantial changes, Niccol expressed optimism, citing initial positive signs from the turnaround strategy. He noted an increase in customer visits and longer stays in renovated stores, along with improved transactions and sales during peak hours where additional staff were deployed. However, the company has faced challenges, including negative same-store sales and declining store earnings for six consecutive quarters, according to Visible Alpha. Furthermore, Starbucks is reportedly exploring options for its business in China, including the potential sale of a stake, reflecting difficulties in that market.
The appointment of Brian Niccol as CEO was initially met with enthusiasm from investors, with shares surging 22% upon the announcement. Niccol's previous success in orchestrating a comeback for Chipotle Mexican Grill after an E. coli outbreak fueled hopes for a similar trajectory at Starbucks. However, investor sentiment has since moderated, with the stock experiencing a nearly 13% decline over the past year and a 9% drop in 2025, despite remaining above its pre-Niccol levels.
The current restructuring phase underscores Starbucks' commitment to adapting its business model. By consolidating its retail presence and optimizing its corporate expenditures, the company aims to solidify its foundation for future growth. The focus remains on enhancing the customer experience and operational efficiency, strategically navigating market shifts, and addressing the challenges posed by competitive pressures and evolving consumer preferences.