Starbucks CEO Brian Niccol on Thursday said the company is planning on closing underperforming locations, including those where the coffee chain is “unable to create the physical environment our customers and partners expect,” and will cut 900 jobs.
The overhaul will cost $1 billion, according to a Thursday regulatory filing. Most of the costs are related to the store closures, such as $450 million in costs for breaking leases early. About $150 million will cover expenses for cutting the 900 employees, who Niccol said are “nonretail” workers.
Niccol disclosed the plan in a letter to employees, but didn’t specify how many locations would be shuttered. He did note that after adding some new locations over the last year, the company’s overall store count in North America will decline by about 1% in fiscal year 2025.
The company will end its current fiscal year with about 18,300 locations, he added. In its 2024 fiscal year, the company had 18,424 coffee shops.
The overhaul comes as part of Niccol’s “Back to Starbucks” plan, a strategy designed to revitalize its coffee shops and convince consumers to return to the stores. Although Starbucks remains profitable, its sales have slowed amid heightened competition from rivals such as Dunkin’.
“[W]e 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, and these locations will be closed,” Niccol wrote in the letter.
“Each year, we open and close coffeehouses for a variety of reasons, from financial performance to lease expirations. This is a more significant action that we understand will impact partners and customers,” he added.
Which Starbucks stores are closing?
Starbucks didn’t disclose the locations it will be closing, although its app will be updated Sunday to reflect stores that remain open, according to the company.
Among the locations closing is the Capitol Hill Roastery in Seattle, the company said.
Starbucks will continue to operate its Roasteries, which are larger, upscale locations, in Chicago, Milan, New York, Shanghai and Tokyo, the company said.
About 500 North American locations are likely to be shuttered in the current quarter, according to a Thursday research note from TD Cowen analyst Andrew Charles.
It was not immediately clear how many of the affected locations are unionized. Workers at 650 company-owned U.S. Starbucks stores have voted to unionize since 2021, but they have yet to reach a contract agreement with the company.
contributed to this report.