Starbucks plans to shutter hundreds of U.S. stores to improve cafe ambiance

Starbucks is undergoing significant changes in its corporate structure, with plans to close more than 400 stores and lay off approximately twice as many corporate employees. The iconic Seattle-based coffee chain is emphasizing the importance of creating a welcoming and comfortable atmosphere in its stores to continue thriving in an increasingly competitive environment.

By the end of the year, Starbucks will reduce its North American locations to nearly 18,300, shedding over 430 stores compared to the previous quarter’s results from July. Additionally, the company intends to renovate more than 1,000 existing locations to enhance the overall customer experience. CEO Brian Niccol articulated the company’s vision, stating, “Our goal is for every coffeehouse to deliver a warm and welcoming space with a great atmosphere and a seat for every occasion.”

The decision to close certain stores was informed by a comprehensive portfolio review that identified locations where Starbucks struggled to create the desired physical environment for customers and partners or failed to see a path to financial success. Despite the closures, Starbucks remains committed to opening more stores in 2026. The restructuring endeavors are estimated to cost the company around $1B, as detailed in recent filings with the Securities and Exchange Commission. The incurred expenses entail lease exit costs, employee separation benefits, and noncash charges related to asset impairment.

While the total number of store closures was not disclosed in Niccol’s announcement or the SEC filings, affected Starbucks locations will receive notification directly from the corporate headquarters. Starbucks is dedicated to supporting the affected employees, ensuring a smooth transition by offering transfers to other locations or appropriate severance packages. In parallel, approximately 900 corporate employees will be laid off, with Niccol expressing gratitude to departing employees and urging continued commitment from those working towards the company’s revitalization.

Elliott Investment Management, an activist investment firm, has gained a significant interest in Starbucks, pressing for improved profitability and shareholder value. In response to this pressure, Brian Niccol was appointed as CEO last August with a mandate to reverse the company’s declining sales. Starbucks faced a 2% decrease in sales in the third quarter, primarily driven by a dip in comparable store sales, highlighting the challenges posed by a competitive market.

Notably, Starbucks is not only contending with local independent coffee shops in North America but also facing competition from global players like Luckin Coffee, China’s largest coffee chain. Despite opening its first U.S. location in July, Luckin Coffee has over 20,000 outlets in China and has been a formidable competitor to Starbucks in Asia. As Starbucks navigates through these changes and challenges, the focus remains on delivering a premium customer experience in its stores while adapting to the evolving demands of the market.