Written By Lexx Thornton
Starbucks announced a $1 billion restructuring plan Thursday that involves closing some of its North American coffeehouses and laying off more workers as it moves ahead with its “Back to Starbucks” transformation under CEO Brian Niccol.
The number of company-operated stores in North America will decline by about 1% in fiscal 2025, accounting for both openings and closures, the company said in a Securities and Exchange Commission filing. That figure translates to roughly 500 gross closures, according to TD Cowen estimates.
Approximately 900 nonretail employees will be laid off on Friday, Starbucks said. Starbucks estimates that 90% of the expected $1 billion restructuring cost will be attributable to the North America business. In total, the company expects to incur about $150 million in employee separation costs, plus about $850 million in restructuring charges related to the store closures, according to the filing. A significant portion of expenses will be incurred in fiscal 2025, it said.
The company plans to end its fiscal year with almost 18,300 North American locations, including both company-operated and licensed cafes. Starbucks plans to start growing its footprint again in fiscal 2026.
Starbucks said in the filing that it is prioritizing investment “closer to the coffeehouse and the customer” as it looks to reverse a sales slump in its biggest market. The company’s same-store sales have fallen for six straight quarters, hurt by increased competition and price-conscious consumers.
This is the second round of layoffs in Niccol’s tenure, after 1,100 corporate workers were let go earlier this year. Starbucks ended 2024 with about 16,000 employees who work outside of store locations.
“These steps are to reinforce what we see is working and prioritize our resources against them,” Niccol wrote in a letter to employees on Thursday. “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.”
In July, the company announced its biggest investment ever into labor and operating standards, “Green Apron Service,” which involves a more than $500 million investment in labor hours across company-owned cafes in the next year.
In an interview earlier this month, Niccol told CNBC, “I really hope we’re moving towards being the world’s greatest customer service company, [and] the world’s greatest customer-centric company.”
In the message to employees on Thursday, Niccol said the company had reviewed and identified stores where the company would be “unable to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance.” TD Cowen analyst Andrew Charles wrote in a note to clients that the store closures are “more than we anticipated.”
Starbucks executives had previously said that the company would be slowing new openings in favor of remodeling existing locations this year. The renovated cafes are meant to encourage customers to linger, taking the coffee chain back to its roots as a “third place” for consumers, outside of home and the office.
Baristas from closing locations will be transferred to nearby locations or, in some cases, receive severance packages, Niccol said in his letter to employees. Starbucks Workers United, which represents 12,000 baristas across more than 650 cafes, said in a statement to CNBC that it will be sending a formal request to the company about the closures.
“We expect to engage in effective bargaining for every impacted union store, as we have done elsewhere, so workers can be placed in another Starbucks store according to their preferences,” the union said in the statement.
Following Thursday’s announcement, shares of Starbucks were down less than 1% in afternoon trading. The stock has fallen more than 8% this year.
In addition to focusing on the customer experience, Niccol has enacted additional changes to operations, including a return to four days in the office, beginning next month.
He’s also brought on a new executive team, including CFO Cathy Smith, Global Chief Brand Officer Tressie Lieberman , and Chief Operating Officer Mike Grams. Lieberman and Grams worked with Niccol in his previous roles at Chipotle and Yum Brands.
