Starbucks to shut 150 company-operated stores in US

21st June 2018 (Last Updated June 21st, 2018 13:31)

Starbucks is planning to close approximately 150 company-operated stores by next year as part of its plans to optimise its store portfolio in the US.

Starbucks to shut 150 company-operated stores in US
Starbucks will close 150 stores in the US. Credit: Starbucks Corporation.

Starbucks is planning to close approximately 150 company-operated stores by next year as part of its plans to optimise its store portfolio in the US.

The move is a part of the company’s strategic priorities to accelerate growth and create long-term shareholder value.

As part of the company’s optimisation plans, new company-operated stores will be shifted to underpenetrated markets and licensed store growth will be slowed down.

This decision will result in a slight decline in the growth rate in the new company-operated stores during the financial year 2019.

In addition, Starbucks announced its various streamlining initiatives such as accelerating product innovation around core beverages through its tea and refreshment category, as well as consumer behaviour trends towards health and wellness in the US and China.

Starbucks president and CEO Kevin Johnson said: “While certain demand headwinds are transitory, and some of our cost increases are appropriate investments for the future, our recent performance does not reflect the potential of our exceptional brand and is not acceptable.

“Over the past year we have taken several actions to streamline the company, positioning us to increase our innovation agility as an organisation.”

“We must move faster to address the more rapidly changing preferences and needs of our customers.

“Over the past year we have taken several actions to streamline the company, positioning us to increase our innovation agility as an organisation and enhance focus on our core value drivers which serve as the foundation to re-accelerate growth and create long-term shareholder value.”

The company also plans to complete its Global Coffee Alliance deal with Nestlé to grow the presence of its brand in consumer packaged goods and foodservice industries globally.

This will add five million points of presence in 189 countries to the company’s portfolio.

Furthermore, Starbucks has expanded its customer base by adding five million members since April 2018. The coffee chain has also increased its Starbucks Rewards members by 13% to 15 million, compared to the previous year.

The company’s new digital initiatives such as the redesigned Starbucks Rewards programme is expected to contribute to its growth in the US in 2019.

Other initiatives under its optimisation plans for 2019 include exploring strategic options to licence company-operated stores in appropriate markets and focusing on general and administrative efficiency by partnering with an external consultant.

The company plans to execute its strategic priorities to improve the return profile of the business and expects to return approximately $25bn in cash to shareholders in the form of share buybacks and dividends through FY20.

Starbucks is also expecting a 1% slight increase in comparable store sales globally for the third quarter of 2018.