Starbucks To Close Coffeehouses, Cut 900 Jobs In $1 Bln Restructuring

(RTTNews) - As part of its "Back to Starbucks" strategy, Coffee giant Starbucks Corp. Thursday announced a $1 billion restructuring plan involving the closure of select coffeehouses and around 900 job cuts.

In a filing with the U.S. Securities and Exchange Commission, the company said it estimates the $1 billion restructuring charges to be related to the store closures, support organization transformation, and other restructuring activities, with 90% of the expenses attributable to the North America business. A significant portion of these charges will be incurred in fiscal year 2025.

Further, in a letter to all North America Partners, Chairman and Chief Executive Officer Brian Niccol said the overall company-operated count in North America will decline by about 1% in fiscal year 2025 after accounting for both openings and closures.

The company plans to end the fiscal year with nearly 18,300 total Starbucks locations, company operated and licensed, across the U.S. and Canada.

In fiscal year 2026, Starbucks aims to grow the number of coffeehouses it operates. Over the next 12 months, the firm also plans to uplift more than 1,000 locations.

Niccol added that the partners in coffeehouses scheduled to close will be notified this week, and they will be offered transfers to nearby locations where possible.

The company will also offer partner care including comprehensive severance packages to those who cannot be immediately placed.

The company added that the planned job cuts will be in current non-retail partner roles. Non-retail partners whose roles are being eliminated will be notified Friday morning. They will be offered generous severance and support packages including benefits extensions.

The firm said it expects that a majority of the store closures will be completed by the end of this fiscal year.

The expected $1 billion charges include approximately $150 million related to employee separation benefits, and around $400 million related to the disposal and impairment of company-operated store assets. Further, around $450 million primarily will be associated with accelerated amortization of ROU lease assets and other lease costs due to store closures prior to the end of contractual lease terms.

Starbucks estimates that these restructuring charges will result in estimated non-cash charges of around $400 million related to asset impairment and disposal. The remaining estimated costs will be future cash expenditures of approximately $600 million related to employee separation benefits and lease exit costs.

Immediately after taking change of the coffee major last year, Niccol had announced his priorities, with a view to focusing on improving the coffee giant's U.S. business before moving to the international markets. He then pointed out the firm's drift from its core, and presented a plan to re-establish Starbucks as the community coffeehouse.

Earlier this year, he stated that the firm was carefully reviewing its North America coffeehouse portfolio through its Back to Starbucks strategy, which focuses on revitalizing coffeehouses.

The firm plans to close those coffeehouses that do not meet the criteria of Back to Starbucks plan, with a view to check whether coffeehouses had a viable path to offering the physical environment consistent with the brand and a clear path to financial performance.

The Company is also further restructuring its support organization.

Niccol now said, "Our goal is for every coffeehouse to deliver a warm and welcoming space with a great atmosphere and a seat for every occasion... As we build toward a better Starbucks, we're investing in green apron partner hours, more partners in stores, exceptional customer service, elevated coffeehouse designs and innovation to create the future. We will continue to carefully manage costs and stay focused on the key areas that drive long-term growth."

On the Nasdaq, Starbucks shares are currently trading at $84.33, up 0.07%.