Starbucks to shut 250 North American stores

Closed coffee shop storefront on empty street illustrating North American store shutdowns

Key Points

01Starbucks (SBUX) will close about 250 North American coffeehouses this week
02The closures represent roughly 1% of its more than 18,000 outlets
03Restructuring charges tied to the move are estimated at $300 million
04Guidance for net new store openings has been cut to about 440 this year

Starbucks announces 250 North American store closures

Starbucks (SBUX) plans to close approximately 250 coffeehouses across North America later this week. The move affects about 1% of the company’s more than 18,000 locations in the region. The closures are scheduled to occur largely before the end of Starbucks’ (SBUX) current fiscal year, which concludes later this month.

The company outlined the closures in a regulatory filing and internal communications. Customers are expected to see affected cafés marked for closure and reflected in Starbucks’ digital channels as the changes take effect.

Rationale for targeted shutdowns

In a memo to employees, Chief Operating Officer Mike Grams said the locations selected for closure either cannot consistently deliver the experience Starbucks aims to provide for customers and employees, or they lack a path to acceptable financial performance. The decision follows a review of the company’s North American coffeehouse portfolio.

The closures are described as a targeted action focused on underperforming stores rather than a broad retrenchment from the market. Management has emphasized continued interest in long-term growth opportunities in North America while it works on store improvements and operational initiatives.

Financial impact and restructuring charges

Starbucks expects to incur about $300 million in restructuring charges related to the store closures. Roughly $200 million of this total is anticipated to be cash costs, primarily tied to lease exit obligations and employee separation benefits.

The remaining approximately $100 million of the restructuring charges is expected to be non-cash, driven by the disposal and impairment of company-owned restaurant assets. These charges will be recognized in connection with the closure program as it is carried out.

Revised store growth outlook

Alongside the closure announcement, Starbucks updated its fiscal-year guidance for net new store openings. The company now expects to add about 440 net new locations this fiscal year.

This compares with a prior guidance range of 600 to 650 net new store openings. The adjustment reflects the impact of the closure plan on the company’s overall store count guidance for the current fiscal period.

Support for affected employees and ongoing strategy

Starbucks has stated that it will attempt to transfer employees from closing stores to other nearby locations where roles are available. When placement is not possible, affected staff will be offered severance support.

The store closures are part of a broader effort that includes store upgrades and other changes in the North American business. Management has indicated that it remains focused on enhancing the in-store experience for customers and employees while pursuing sustainable growth in the region.

Key Takeaways

01Starbucks is executing a focused closure of underperforming North American stores while still expecting net unit growth for the year.
02The roughly $300 million restructuring charge mixes significant cash outlays with non-cash asset impairments, reflecting both lease exits and write-downs.
03By reducing its net-new store guidance to about 440 openings, Starbucks is tempering short-term expansion to prioritize portfolio quality and performance.

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