Starbucks job cuts and store closures as sales slump hit the coffee chain. Photo / Getty Images
Starbucks plans to close scores of cafes and sack 900 people in a push to turn around the struggling coffee chain.
Brian Niccol, the company’s chief executive, outlined the plans in a letter to employees this week. He said the chain would shut locations that were unable to “deliver a warm and welcoming space” or meet financial targets.
The overhaul will involve closing more than 100 shops in North America and locations in the UK – though Starbucks declined to give an overall total – while 900 “non-retail” staff will also be made redundant as part of the overhaul.
Niccol said: “Each year, we open and close coffee houses for a variety of reasons from financial performance to lease expirations. This is a more significant action that we understand will impact partners and customers. Our coffee houses are centres of the community and closing any location is difficult.”
He added: “I know these decisions impact our partners and their families and we did not make them lightly.”
The closures come as the world’s biggest coffee chain battles slowing sales. Niccol, the former boss of Mexican fast food chain Chipotle, was brought in to turn around performance last year.
His restructuring plan is expected to cost around US$1 billion (NZ$1.7b) and will see the chain focus on improving existing stores to make them more inviting.
Niccol joined Starbucks last year, tasked with a turnaround after replacing former chief Laxman Narasimhan.
However, Niccol faced an immediate backlash after it emerged that a private company jet would ferry him from his California home in Newport Beach to the chain’s Seattle headquarters after he refused to relocate.
His pay deal – worth up to $113m (196m NZD) – was also four times larger than that of his predecessor, Narasimhan. Since Niccol joined, Starbucks shares have fallen by about 12%.
On Thursday, Niccol said: “We’re investing in green apron partner hours, more partners in stores, exceptional customer service, elevated coffee house designs and innovation to create the future.”
The company is planning to open 80 new stores in the UK this year but some existing British stores will close as a result of the turnaround plan. It would not say how many.
The chain runs more than 500 company-owned stores across the UK – not counting those run by franchisees – and employs more than 5500 people in Britain.
The restructuring follows a difficult period for Starbucks, which has been criticised for its high prices.
At the same time, it has been forced to fend off pressure from activist investors and boycotts over a perceived link with Israel during the conflict in Gaza, which Starbucks has said is caused by misinformation online.
Earlier this year, the operator of Starbucks’ Middle Eastern franchise said it would have to lay off thousands of workers because of a drop in sales caused by boycotts.
The company’s American arm, meanwhile, has also faced strike action from workers over pay and conditions.
In the UK, it has been forced to grapple with aggressive competition from both higher-end coffee chains such as Gail’s and cheaper brands like Greggs.
Latest accounts for the company’s British arm show sales fell from £548m (NZ$1.3m) to £526m (NZ$1.2m) over the year to September 29, 2024, while it posted a pre-tax loss of £36.2m (NZ$83.7m).
Starbucks posted a 2% decline in global sales over the three months to June 29, it said in a recent update for investors.
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