Thursday, 15 November, 2018

Starbucks to close 150 US cafes to combat slowing growth

Signage at a Starbucks store in New York Signage at a Starbucks store in New York , The Canadian Press
Jean Garcia | 20 June, 2018, 06:45

The announcement was made on the heels of revealing that Starbucks was expecting same-store sales to grow just 1 percent for the quarter of the fiscal calendar beginning next month - after initially projecting a 2.9 percent growth.

Starbucks shares fell in after-hours trading Tuesday after the coffee chain's same-store sales forecast for the third quarter missed forecasts.

Starbucks said it would look to open more stores in under penetrated markets and explore strategic options to license company-operated stores.

Closing stores is not new for businesses, but the 150 figure is almost three-times the average for the company.

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"That is, in my view, not an acceptable performance and we need to do better", said Johnson, who has been in the top job at the Seattle-based coffee giant for a little more than year. Chief Financial Officer Scott Maw said that the closures "had an impact".

He also pointed to the impact of the company's response to the April arrest of two black men in a Philadelphia store, including the May 29 afternoon closure of 8,000 US stores for anti-racial bias training. Starbucks said it would provide additional details on its plans at an investor presentation on Tuesday afternoon.

On a conference call with analysts, CEO Kevin Johnson said those regions include the Midwest and the South, where Starbucks is far less ubiquitous than it is in Manhattan and Washington, D.C. The news was reminiscent of Starbucks' efforts a decade ago to close stores following years of aggressive expansion that led to softening comparable sales growth. The overall number of stores will continue to increase, but that growth will be focused. It will also try to optimize the store formats it offers, from small mobile-order pickup locations to drive-through to more elaborate high-end Roastery and Reserve stores. Outgoing chairman Howard Schultz said the training cost Starbucks "tens of millions" of dollars.

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