Starbucks to Close Unprofitable Stores, Cut 900 Jobs Amid 2% Sales Decline

Starbucks has announced plans to close unprofitable stores and reduce headcount at its corporate offices. The company's chief executive is currently driving a transformation plan aimed at restructuring the business.

In a letter posted on the company's blog and sent to employees, the chief executive stated that as part of a 10 billion yuan restructuring plan, the company intends to cut 900 non-retail positions and freeze some vacant positions. The memo noted that employees would be notified on September 26, with the company offering "severance pay and support packages, including extended benefits."

The chief executive wrote, "We will continue to prudently control costs and focus on driving long-term growth in core areas."

Prior to this round of layoffs, Starbucks had already cut 1,100 employees earlier this year. The chief executive stated that the company plans to use the saved funds for store investments, including adding customer service personnel. Other investment areas include new café designs and business innovations.

In July, the chief executive revealed that starting from September 30, all corporate employees, including those in support roles and management, would be required to work on-site four days a week.

Despite the chief executive's one-year anniversary at the helm of Starbucks on September 9, the company continues to face turbulence. In the latest quarterly report, Starbucks disclosed that its same-store sales in the U.S. have declined for the sixth consecutive quarter. The same-store sales for the quarter decreased by 2%, matching the previous quarter's decline but falling short of the earlier forecast of 2.5%. The decline in sales was primarily due to a 4% drop in same-store transactions, while the street had previously anticipated a 4.5% decline.

The chief executive also mentioned plans to reassess the store portfolio during the earnings call. Currently, Starbucks aims to reduce the number of stores in the U.S. and Canada by approximately 1% for the fiscal year (net change after accounting for closures and new openings). By the end of the fiscal year, the total number of company-operated and licensed stores in the U.S. and Canada is expected to be around 18,300. As of the third quarter of this year, the number of Starbucks stores in North America was 18,842.

The chief executive wrote, "We have identified certain cafes that either cannot provide the expected in-store environment for customers and partners or do not show a clear path to achieving strong financial performance. These stores will be closed."

Over the next 12 months, Starbucks plans to invest in 1,000 stores to further enhance the cozy and comfortable café atmosphere, gradually phasing out the previous customer experience model centered around "in-store pickup."

In a July call with investors, the chief executive stated that Starbucks plans to conduct targeted small-scale renovations for stores, investing approximately 150,000 yuan per store to reinstall thousands of customer seats that were previously removed.

For new stores, the chief executive mentioned that the company has reduced construction costs by approximately 30% and plans to launch a new standalone store prototype in the 2026 fiscal year. This prototype store will have 32 seats and be equipped with a drive-thru lane.