Starbucks to Close More Stores Amid Glut of Coffee Shops

Adjust Comment Print

The Seattle-based company announced Tuesday that it will close 150 underperforming stores in heavily penetrated markets, up from the usual rate of 50 closings a year.

If you sometimes get the impression there is a Starbucks (sbux) on every street corner in major USA cities, you're not that far off mark.

The closing stores are often in "major metro areas where increases in wage and occupancy and other regulatory requirements" are making them unprofitable, Johnson said.


When Starbucks released its second-quarter earnings in late April, the chain had net revenues of $6 billion, a 13.9 percent increase from $5.29 billion in the same period in fiscal year 2017.

"The competitive environment has really become a lot stronger in the U.S". Investors reacted to news that Starbucks could experience its worst performance in about nine years by sending the shares down 3.8% in pre-market trading. Johnson said the chain will focus on less established suburban areas as well as improving its food offerings, which he says will include lunch salads and sandwiches.

"We're putting more of our energy into that afternoon day part and the portfolio of beverages that are offsetting some of the declines we're seeing in Frappuccino beverages", Johnson said, citing a consumer shift away from sugary drinks.


The chain is also relying on its digital initiatives to contribute between 1 and 2 percent to comparable sales next fiscal year.

The chain, which operates more than 8,000 USA stores, said the changes were made to address the weaker-than-expected sales growth, adding that several digital initiatives were expected to add 1% to 2% in comparable sales in fiscal 2019.

The company also said it would look to cut general and administrative expenses with plans to partner with an external consultant to speed up the process.


According to Bloomberg, the nationwide chain plans to reduce its amount of stores in "densely populated markets" across America, with the newly announced CEO saying "our shareholders deserve better".

Comments