Starbucks to shut down hundreds of stores, lay off staff — here's why the coffee giant is restructuring
Starbucks has approved a restructuring plan, involving store closures and staff layoffs. The company anticipates the implementation of the plan to cost $1 billion while aiming to revive sales.
Starbucks announced on Thursday that it has approved a restructuring plan to turn around its “struggling business”, which will involve shutting down underperforming coffee houses and laying off staff.
The company expects to incur about $1 billion in costs under the restructuring plan in an attempt to revive sales and profits under CEO Brian Niccol, Starbucks said in a regulatory filing.
Hundreds of outlets to halt operations this month
Niccol noted that Starbucks will permanently halt operations at hundreds of outlets this month, or about 1% of its locations. The company had 18,734 stores in North America at the end of June, and by the end of September, it will end up with 18,300 stores, CNN reported.
In a letter to employees, the chief executive said the company underwent a review of its footprint and the locations that will be shut and described them as the ones who were “unable to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance”.
Other than closing stores in certain locations, the coffee giant also announced that around 900 employees across the affected stores will be laid off. This is the second round of layoffs, with the first one notified in February, when roughly 1,000 staff lost their jobs, the news report said.
Affected employees will be notified on Friday and will receive “generous severance and support packages”. Also, “many” open positions will be closed, Niccole announced
Why is Starbucks struggling?
This move is driven by Starbucks' aim to reduce expenses at a time when demand for its expensive drinks has lowered in the United States.
The coffee giant is also trying to sell a stake in its China business, which is facing increased competition and weak demand in the country's locations, Reuters reported.
The company's shares were flat in premarket trading. In this year, its stock price has been down by 7.7 per cent, reflecting the investors' bearish sentiment.