Starbucks Closes Underperforming Locations, Lays Off 900 Employees Amid Turnaround Efforts

Starbucks is closing dozens of US and Canadian locations as part of its turnaround effort, launched last September, and laying off 900 white-collar employees to cut costs and focus on "key areas that drive long-term growth." The company aims to create a more inviting cafe experience, but competitors have found success with drive-thrus and quick turnover. Despite signs the strategy is working, same-store sales have been negative for six consecutive quarters.

Starbucks has announced plans to close a significant number of stores in the U.S. and Canada as part of its ongoing turnaround strategy. The specialty coffee chain will close approximately 1% of its locations, translating to around 150 to 200 stores, and lay off 900 white-collar employees. These actions are part of the "Back to Starbucks" strategy initiated by CEO Brian Niccol, who took over in September 2024.

The company cited underperformance and the inability to create the desired physical environment in certain locations as reasons for the closures. Niccol stated that the goal is to focus on key areas that drive long-term growth, including enhanced customer service, elevated coffeehouse designs, and innovation. The closures will result in a loss of about 900 jobs, with employees at the affected stores being notified this week.

The move comes amidst a challenging economic environment, with elevated inflation and sluggish sales. Starbucks has experienced six consecutive quarters of declining same-store sales, a metric that examines performance at individual locations over time. The company aims to improve its interior designs to make stores more inviting and increase customer loyalty.

The announcement has had a mixed impact on the company's stock price. While shares initially dipped, they later rebounded slightly in pre-market trading. Starbucks expects to end fiscal year 2025 with nearly 18,300 store locations in the U.S. and Canada, with plans to grow the number of coffeehouses in fiscal year 2026.

Starbucks has faced unionization campaigns and back-to-back disappointing fiscal quarters, with traffic declining under broader environmental factors. The company's turnaround plan focuses on reviving the coffeehouse aesthetic, improving operations, and ensuring stores are properly staffed. The goal is to create a more resilient and profitable company.