By Juveria Tabassum
(Reuters) -Starbucks said on Thursday it would shutter underperforming stores in North America and cut 900 jobs in a $1 billion restructuring effort, as CEO Brian Niccol presses ahead with his plan to revive the company’s fortunes.
In his first year on the job, Niccol has zeroed in on investing in Starbucks’ stores to reduce service times and restore a coffee-house environment, while also trimming management layers.
The company has posted six straight quarters of sales decline in the U.S. as demand for its pricey lattes took a hit from consumers turning picky and competition ramping up.
“During the review, we 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 said in a letter to employees.
The company expects a majority of the store closures to be completed by the end of this fiscal year, taking its company-operated store count in North America down by about 1%.
The CEO said the company would end the fiscal year with nearly 18,300 total Starbucks locations – company operated and licensed – across the U.S. and Canada. This compares to the 18,734 locations disclosed in a July regulatory filing.
INVESTING IN QUICKER SERVICE
Niccol has enjoyed the confidence of investors since taking over after his leadership at Chipotle Mexican Grill where he is credited with leading a turnaround at the burrito chain.
“I continue to like the turnaround story here as we continue to get more visibility into the future. The company has always invested in innovation and becoming more lean will enhance the story moving forward,” said Dave Wagner, portfolio manager at Aptus Capital Advisors, which holds Starbucks stock.
Starbucks said on Thursday the job cuts would be in its support teams and added the company would also close many open positions.
The company employed about 10,000 people in non-coffee-house roles in the U.S., as of September 29, 2024.
“This is a more significant action that we understand will impact partners and customers,” Niccol said.
At the same time, Starbucks is investing to improve staffing and incorporate technology to more efficiently sequence orders at its coffee shops and enhance customer experience.
The company said earlier this year it would eliminate 1,100 corporate roles. In August, it also announced a modest 2% hike to all salaried employees in North America this year.
Starbucks shares were down marginally in early trading. They have risen about 9% since Niccol took over in August 2024.
(Reporting by Juveria Tabassum in Bengaluru; Editing by Leroy Leo and Sriraj Kalluvila)
