Starbucks’s roller coaster week of job cuts and store closures
The coffee chain’s “Project Bloom” was months in the making, and days in execution.
In Starbucks’s Seattle headquarters, it was known as “Project Bloom."
Launched earlier this year, the hush-hush undertaking evaluated thousands of the company’s coffee shops across North America on profitability, and the experience of customers and baristas.
It led to a roller coaster of a week in late September, in which the company abruptly closed hundreds of stores and laid off thousands of employees. It was Starbucks’s second round of corporate layoffs in less than a year under Chief Executive Brian Niccol and among the chain’s biggest closing of cafes since 2008.
“The reality is the business has not performed and we needed to recognize that aspect," Niccol said in an internal company forum Tuesday, a recording of which was reviewed by The Wall Street Journal. “We needed to make some changes."
In a year at Starbucks’s helm, Niccol has overhauled its workforce and operations. He has remade the C-suite, hiring new executives to head operations, finances and development, while technology and coffee-sourcing leaders have retired in recent weeks. Menus and advertising are also evolving.
Now, with the cafe closures and staff cuts, a company long known for its sprawling growth has abruptly shrunk.
Niccol and his team have said major changes were needed to rebound from six consecutive quarters of declining same-store sales, and to build a more sustainable company that can pave the way to growth. Americans are recoiling at rising restaurant and coffee prices and eating out less, making Starbucks’s turnaround more challenging.
‘Quick turnaround’
In April, Niccol said Starbucks would review its global store portfolio and pipeline of new locations as construction and renovation costs climbed. He said in July that the review of North American stores would wrap up in two months.
Starbucks regularly reviews its store portfolio, but this assessment was more ambitious. The company owned 11,450 stores in the U.S. and Canada as of June 29, and licensees operated 7,300 others at locations like airports, hotels and malls.
Many Starbucks divisions were involved in assessing stores. Executives wanted the review on underperforming locations done by the end of the company’s fiscal year on Sept. 29.
The company’s board signed off on the store-closure and corporate-layoff plans last week.
Early on Thursday, Sept. 25, baristas and corporate employees received a companywide message from Niccol announcing the layoffs, store closures and reinvestment priorities. “These steps are to reinforce what we see is working and prioritize our resources against them," Niccol said in the message.
Later that morning, Starbucks notified managers in cafes marked for closure. Regional corporate leaders convened calls with managers at stores remaining open to walk them through the plans.
The company advised store managers that they would need to help dispose of suddenly unneeded inventory, like cups, oat milk and lemonade. They also might hear from baristas looking for jobs.
“Transparently, this is a really quick turnaround," said one regional Starbucks leader on a call, a recording of which was reviewed by the Journal.
Closing cafes
In closing locations, store signs went up to notify customers. The company provided a QR code to help them find a new one.
On Sunday, baristas at closing stores received emails about their jobs.
“We regret to inform you that we no longer have a position available for you at Starbucks," read one of the emails. “We wish you all the best in your future endeavors."
Some customers vented online about the closures, and questioned their Starbucks loyalty. Baristas posted tearful TikTok videos after receiving layoff notices. Some of Starbucks’s tightknit alumni offered assistance for those laid off, and others criticized the cuts and closures.
“A huge impact to the soul of Starbucks," Christine McHugh, a former vice president who spent 27 years at the company before leaving in 2017, said in a LinkedIn post last week.
Starbucks said it hopes to hire back baristas as it resumes opening new stores this fiscal year, and said it is giving laid-off baristas an industry-leading severance package.
Some investors were pleased to see Niccol take action on Starbucks’s expenses, and that store closures were occurring quickly. Since Starbucks announced the layoffs and store closures in late September, its stock has gained about 2.6%.
The new message
On Monday, Niccol said in a video message to employees that he hoped the broad staffing cuts and store closures were over. Shutting down stores like its flagship Seattle Reserve Roastery location was painful, but they were losing money, he said, and closing underperforming locations helps allocate resources to other cafes.
The following day Niccol held a forum at Starbucks’s headquarters with employees and operations chief Mike Grams, to further explain his decisions and map out the road ahead. The last days were tough, Niccol said, but so were the months leading up to the closures.
Efforts over the past year to reinvest in cafe service and atmosphere have been boosting business, executives said, with the chain directing hundreds of millions of dollars toward cafe staffing and improvements.
Niccol said sales this week were strong, and the company was set to introduce new food and beverages, and a better app.
One morning early this week, Niccol said, he visited a Starbucks location to check in on a line of protein-infused beverages making their debut that day. He ordered around eight of them, and liked what he saw and tasted.
“One day isn’t a trend, but one day is how you start a trend," he said.
Write to Heather Haddon at heather.haddon@wsj.com
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