Starbucks CEO Brian Niccol announced that the popular coffee chain will lay off about 900 workers, while also closing a few outlets in North America. This move is a part of the coffee giant’s $1 billion restructuring plan, as said by the CEO on Thursday. A memo to the employees has already been released, which details that the store closures will amount to about 1% decline in the total number of outlets in North America in the fiscal year.
On Thursday, Niccol said, “While we’re making good progress, there is much more to do to build a better, stronger, and more resilient Starbucks.” The major announcement resulted in a slight increase in pre-market trading for Starbucks early Thursday morning.
Notably, this comes after the coffee giant witnessed six consecutive quarters of declining same-store sales. For those unfamiliar, it is a metric that analyzes performance at individual locations over the time period since opening.
These sluggish sales are a result of elevated inflation, as revealed by experts, according to ABC News. After the metric sounded the alarm on its sluggish sales, the company has decided to rebrand through the improvement of the interior in its many stores. The CEO believes this new restructuring plan will boost sales and also improve customer experience.
At the same time, this renovation is not achievable at some stores across North America; therefore, these locations will be closed permanently. “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,” CEO Brian Niccol said on the Thursday release.
According to the announcement, Starbucks now aims to end fiscal year 2025 with 18,300 stores across the United States and Canada. Employees at the locations that are soon to be closed will soon be informed. As revealed by Niccol, the company also plans to relocate workers currently stationed at these locations designated for closure. If relocation is deemed impossible, the coffee giant hopes to provide at least “comprehensive severance” to these 900 workers who would be laid off.
During his announcement on Thursday, the Starbucks CEO said, “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. Our coffeehouses are centers of the community, and closing any location is difficult.”
He acknowledged, “This is a more significant action that we understand will impact partners and customers.” As part of this cost-saving move, the chain would also close some of its worst-performing UK stores, according to the BBC. However, at the same time, Niccol added that they are still “on track” to inaugurate 80 new locations in the UK.
