Starbucks Announces Store Closures and Layoffs Amid Turnaround Efforts

Starbucks has announced the closure of hundreds of stores across the United States, Canada, and Europe, along with the layoff of 900 non-retail employees, as part of a strategic effort to revitalize its business. The Seattle-based coffee chain stated that store closures would commence immediately, with affected baristas being offered severance packages and, where possible, transfers to other locations.

The company did not specify the exact number of stores slated for closure but indicated an expectation to operate 18,300 North American locations by the end of its fiscal year on Sunday, down from 18,734 as of June 29. In a letter to employees, Starbucks Chairman and CEO Brian Niccol explained that a review identified locations lacking a path to financial stability or the ability to meet customer expectations, leading to the decision to close these stores.

"Each year, we open and close coffeehouses for a variety of reasons, from financial performance to lease expirations," Niccol wrote. "This is a more significant action that we understand will impact partners and customers. Our coffeehouses are centers of the community, and closing any location is difficult."

The company anticipates spending $1 billion on the restructuring, including $150 million on employee separation benefits and $850 million related to physical store closures and lease exits. It remains unclear how many of the closing stores are unionized. Since 2021, workers at 650 company-owned U.S. Starbucks stores have voted to unionize, though contract agreements have yet to be reached.

Starbucks Workers United, the labor group organizing workers, criticized the closures, stating they were made without input from baristas. The union plans to engage in bargaining at each union-represented store slated for closure to ensure workers can be placed at preferred locations.

"Fixing what's broken at Starbucks isn't possible without centering the people who engage with the company's customers day in and day out," the union said.

This marks the second round of layoffs at Starbucks this year. In February, the company announced the layoffs of 1,100 corporate employees globally and eliminated several hundred open positions. Niccol, a turnaround specialist, was brought into Starbucks a year ago to rejuvenate the brand, following his successful tenure at Chipotle.

In July, Starbucks reported its sixth consecutive quarter of declining same-store sales, with weak U.S. traffic continuing to impact the company. Niccol aims to reverse this trend by adding staff, making stores more inviting, and introducing software to prioritize orders, ensuring customers receive their drinks within four minutes.

Starbucks shares fell 1% following the announcement.