Starbucks to Close 400 North American Stores, Lay Off 900 Employees in Restructuring Plan

Starbucks has announced that it will close 1% of its stores in North America this month, which amounts to approximately 400 locations. This move is part of a 10 billion yuan restructuring plan that also includes the layoff of 900 employees. The CEO stated that the stores to be closed either do not meet the expectations of customers and employees or are not profitable.

For a global coffee giant with over 32,000 stores worldwide, closing around 400 stores might seem like a minor adjustment. However, the fact that Starbucks is currently downsizing is significant for its business operations. The company still plans to open new stores next year, but the current closures indicate a strategic shift in response to changing market conditions.

Analysts point to three main reasons for Starbucks' decision to close stores and reduce its workforce. The first reason is the shift in consumer behavior due to the COVID-19 pandemic. Many consumers have moved away from urban centers, leading to a decrease in foot traffic in these areas. As a result, Starbucks is terminating leases in regions where business has significantly declined.

The second reason is the increasing competition from independent coffee shops and growing coffee chains, as well as drive-thru companies. These competitors are attracting customers who are looking for alternatives to Starbucks' offerings. Additionally, customers are becoming more price-sensitive, with a recent survey indicating that over 70% of respondents plan to reduce their visits to Starbucks in the next 12 months due to price increases. This trend is particularly pronounced among individuals with incomes below 100,000 yuan.

The third reason is the broader economic uncertainty and the rapid expansion of competitors focusing on drive-thru services. This has made Starbucks' transformation more challenging. Despite these obstacles, analysts believe that Starbucks is moving in the right direction under the leadership of its CEO. They acknowledge that the transformation process may take longer than initially anticipated, potentially extending until the first half of 2026. However, they see positive signs of progress in the CEO's initiatives and expect significant impacts once these measures take effect.