Starbucks is taking “significant action” to revive its faltering business, announcing widespread store closures and another round of corporate layoffs as part of CEO Brian Niccol’s effort to steer the chain back to growth.
Niccol said Thursday the company will shut down hundreds of cafés this month, representing about 1% of its footprint. Starbucks operated 18,734 locations in North America at the end of June and expects to finish September with 18,300 stores.
The sweeping restructuring will cost the company about $1 billion. Shares of Starbucks (SBUX) were flat in premarket trading after the announcement.
In a letter to employees, Niccol explained the closures followed a companywide review. Stores set to close were those “unable to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance.”
Store closures are not unusual for Starbucks, but Niccol emphasized that this move is larger than typical adjustments.
“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,” he said.
Even with hundreds of cafés shutting down before the fiscal year ends next week, Starbucks said it plans to remodel more than 1,000 locations. The updated design will feature cozier seating, more charging outlets, and warmer interior tones.
Alongside the closures, Starbucks announced 900 more layoffs at its headquarters, on top of about 1,000 cuts earlier this year.
Impacted employees will be informed Friday and offered “generous severance and support packages.” Niccol also said that “many” open roles will be eliminated.
“I know these decisions impact our partners and their families, and we did not make them lightly,” he wrote.
“I believe these steps are necessary to build a better, stronger and more resilient Starbucks that deepens its impact on the world and creates more opportunities for our partners, suppliers and the communities we serve.”
Niccol joined Starbucks about a year ago with a mandate to revive growth. But results have lagged, with shares down about 12% over the past year and sales still sluggish.
He has cut the menu by roughly 30% while introducing trend-focused items such as protein toppings and coconut water. Food offerings are being revamped as well, with new croissants and baked goods added.
The company has also introduced smaller changes, such as reinstating self-serve milk and sugar stations and adding doodles to cups. It has updated its official name to “Starbucks Coffee Company” to emphasize its core product.
Not all changes have been well received. Some baristas have opposed new uniforms, leading to lawsuits, while complicated drinks have added pressure during busy hours.
