Starbucks Announces $10 Billion Restructuring Plan, Closing 1% of Stores

Starbucks has announced a significant restructuring plan valued at 10 billion dollars, which includes the closure of numerous underperforming stores and the reduction of approximately 900 positions. The company anticipates that the total cost associated with employee departures will be around 150 million dollars, in addition to approximately 850 million dollars in restructuring expenses related to store closures. A substantial portion of these costs is expected to be incurred during the 2025 fiscal year.

The restructuring plan is part of a broader strategy to optimize the company's operations and enhance its competitive position. Starbucks aims to reduce its total number of stores by 1% by the end of the 2025 fiscal year, maintaining approximately 18,300 stores in the North American region. The company also plans to renovate and upgrade an additional 1,000 stores to improve customer experience and attract more foot traffic.

The decision to close certain stores was made after a comprehensive evaluation of the company's retail locations. The focus will now be on developing stores that align with the strategic vision of the new chief executive officer, who aims to transform Starbucks into a more appealing destination for consumers. The CEO highlighted that initial renovations have already shown positive results, with increased customer visits and longer stay durations, as well as positive feedback from customers.

The restructuring plan is the second major initiative under the new leadership, following a previous round of employee reductions. The company is facing intense competition from smaller coffee chains, which offer lower-priced beverages and faster service. To address these challenges, Starbucks is streamlining its menu and reducing the complexity of beverage preparation, which will also create space for new product offerings that better meet changing consumer preferences. The company has already expanded its selection of sugar-free beverages and introduced a line of protein-infused drinks to cater to the growing demand for healthier options.

Despite these efforts, the company's financial performance has not yet shown significant improvement. The restructuring plan is part of a broader strategy to turn around the company's fortunes, which have been impacted by declining same-store sales over the past six quarters. The company is also facing increased competition in its core markets, including the United States and China, where smaller coffee chains are gaining market share.

Starbucks has also announced a significant investment in labor and operational standards, known as the "Green Apron Service," which includes a 500 million dollar investment in labor hours across all company-owned stores next year. This initiative aims to enhance the overall customer experience and ensure that the company's employees are well-supported in their roles. The CEO has expressed a strong commitment to transforming Starbucks into the world's leading customer service company, with a focus on creating a more customer-centric environment.

In a message to employees, the CEO emphasized the importance of prioritizing resources to create a more effective and resilient Starbucks. The company has identified stores that are unable to meet customer expectations or demonstrate financial viability and will be closing these locations. Employees from these stores will be offered the opportunity to transfer to nearby locations or receive severance packages. The Starbucks Workers United, representing over 12,000 employees across 650 stores, has expressed a willingness to engage in labor negotiations to ensure that affected employees are fairly treated and can be reassigned to other Starbucks locations if desired.