The Seattle coffee giant said store closures would start immediately. Starbucks said affected baristas will be offered severance packages and transfers to other locations where possible.
The company wouldn't give a number of stores that are closing, but the bulk of the closures appear to be in the U.S. and Canada. Starbucks said it expects to have 18,300 North American locations when its fiscal year ends on Sunday. As of June 29, the company had 18,734 locations.
In a research note Thursday, TD Cowen analyst Andrew Charles estimated Starbucks will close around 500 North American stores in its fiscal fourth quarter.
In a letter to employees in Europe, Starbucks Chairman and CEO Brian Niccol said some locations in the U.K., Austria and Switzerland will also be closing. Starbucks didn't say how many stores will be impacted on those nations, either.
Starbucks said it will notify nonretail employees whose positions are being eliminated early Friday. Starbucks asked employees who can work from home to do so on Thursday and Friday.
In a letter sent to employees Thursday, Niccol said a review of the company's stores identified locations where the company doesn't see a path to financial stability or isn't able to create the physical environment customers expect. Those stores are being closed.
“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.”
Starbucks said it expects to spend $1 billion on the restructuring, including $150 million on employee separation benefits and $850 million related to the physical store closing and the cost of exiting leases.
Starbucks shares fell 1% Thursday.
It was not immediately clear how many of the stores that are closing are unionized. Workers at 650 company-owned U.S. Starbucks stores have voted to unionize since 2021, but they have yet to reach a contract agreement with the company.
Starbucks Workers United, the labor group organizing workers, said Thursday that the closures were made without input from Starbucks' baristas. The union said it intends to engage in bargaining at every union-represented store that is closing to ensure workers can be placed at another store they prefer.
“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.
News of the store closures arrived just over a week after unionized employees in three states sued Starbucks over its new dress code, saying the company refused to reimburse workers who had to buy new clothes.
Starbucks said it used a consistent set of criteria to determine the stores that are closing and union representation wasn't a factor.
