Starbucks (NASDAQ: SBUX) announced a significant restructuring plan designed to tackle ongoing challenges in its largest market, North America. The $1 billion initiative includes closing some company-operated coffeehouses and laying off approximately 900 non-retail employees as part of CEO Brian Niccol’s efforts to revive the iconic coffee chain’s performance and customer experience. This follows an earlier round of layoffs earlier this year, where about 1,100 corporate positions were cut.
The closures will likely affect roughly 1% of Starbucks’ North American locations, which as of the end of June this year, numbered more than 11,400 company-operated stores. This translates to over 100 stores either closing or being consolidated by the end of the fiscal year. Across all outlets, including licensed locations, Starbucks expects the total number of stores in the US and Canada to end 2025 around 18,300, down from the previous count of about 18,700.
Niccol explained that the stores selected for closure failed to meet the company’s expectations for the environment it aims to provide customers and staff or lacked a clear path to profitability. The company is working to notify affected store employees promptly this week, with plans to transfer workers to other nearby Starbucks locations when possible, coupled with severance packages for those unable to relocate.
On the corporate front, the layoffs of 900 staff target support roles outside retail operations. Starbucks management sees these cuts as necessary to better allocate resources to frontline store partners, improve customer service, and invest in remodeling and innovating stores. This restructuring comes amid six consecutive quarters of declining same-store sales, a challenge driven by increasing competition and changing consumer preferences toward more affordable coffee options and healthier beverages.
The financial impact of this restructuring is substantial. Starbucks expects to incur around $1 billion in related costs, with about 90% attributed to the North American operations. The charges include approximately $150 million for employee separation benefits, $400 million for asset write-downs and disposal related to store closures, and about $450 million for lease termination and other related costs. Most of these costs will be recognized within the current fiscal year.
While Starbucks continues opening new stores in some locations, the reshuffle reflects a sharper focus on improving profitability and creating a more engaging in-store experience. Niccol’s turnaround plan involves enhancing physical spaces to encourage customers to stay longer and visit more frequently by adding seating and power outlets. These steps aim to restore Starbucks as a community hub despite the broader industry pressures.
Niccol acknowledged the difficulty of the decisions, emphasizing that closing coffeehouses is never taken lightly, given their role as community spaces. However, he stressed that these moves are necessary to build a sustainable future for both the company and its employees.
This restructuring initiative marks a critical stage in Niccol’s leadership at Starbucks. The company’s shares had fallen prior to the announcement, reflecting investor concerns about growth and margins. With the new cost-cutting and store optimization strategy underway, the coming quarters will be key to seeing if Niccol’s approach can reverse the sales slide and restore confidence in the brand’s long-term prospects.
Starbucks is clearly focused on reshaping its North American business to align with evolving market conditions while managing costs prudently. Whether these changes will quickly translate into financial improvement remains to be seen, but the company is taking decisive steps to address the challenges head-on while aiming to maintain its place in a crowded coffee market.
