Starbucks Unveils $1 Billion Restructuring with Store Closures and Job Cuts
Starbucks revealed a dramatic $1 billion overhaul plan on Thursday that involves shutting down hundreds of its North American stores and firing workers.
The step is part of its “Back to Starbucks” revamp by CEO Brian Niccol to revive growth and enhance customer experience in light of decelerating sales.
Based on a Securities and Exchange Commission filing, the amount of company-owned stores in North America will fall by approximately 1% in 2025, including openings and closures. It is estimated by analysts that this represents approximately 500 gross closures.
In addition to the closures, Starbucks announced that it will terminate about 900 non-retail employees on Friday. The company anticipates that 90% of the $1 billion expense will come from its North American segment. Of this, roughly $150 million will be used for employee separation expenses, and around $850 million will be used for restructuring charges associated with store closures.
Even with the reductions, Starbucks is set to close out fiscal 2025 with almost 18,300 North American stores, both company-owned and licensed cafes. Growth is predicted to resume in fiscal 2026.
The restructuring follows six consecutive quarters of same-store sales declines in North America, fueled by stiffer competition and price-sensitive consumers. Starbucks is now focusing its investments “closer to the coffeehouse and the customer,” as it tries to rebuild its image as a premium coffee shop.
CEO Brian Niccol explained in a letter to employees:
“These moves are to further strengthen what we see is succeeding and allocate our resources against them. I think these moves are to create a better, stronger and more durable Starbucks.”
This is the second wave of layoffs by Niccol, after axing 1,100 company positions earlier in 2024. Starbucks closed the previous year with about 16,000 staff beyond company locations.
The coffee chain also has been making large investments in operations. It rolled out its “Green Apron Service” effort, a $500 million investment in hours of labor across cafes, to enhance customer service in July. Niccol has also asked corporate staff to come into the office four days a week beginning next month and has remodeled his leadership team, adding CFO Cathy Smith, Global Chief Brand Officer Tressie Lieberman, and COO Mike Grams.
As part of the closures, certain baristas will be relocated to nearby stores, and others will have their severance packages. Starbucks Workers United, representing over 12,000 baristas at 650 cafes, stated it will call for negotiations on the closures to safeguard unionized employees.
TD Cowen analyst Andrew Charles said the number of store closures was “more than we expected.” Nevertheless, executives emphasize the actions are needed to transform and reimagine existing spaces, making them inviting “third places” where customers can spend time away from work and home.
Shares of Starbucks slipped less than 1% on Thursday following the announcement, extending a decline of more than 8% so far this year. Despite the near-term turbulence, Niccol says the company’s long-term goal remains clear:
“I really hope we’re moving towards being the world’s greatest customer service company, [and] the world’s greatest customer-centric company.”
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