Coffee giant Starbucks is taking more steps to slash its expenses, planning to close some North American stores and lay off 900 workers as it tries for a comeback.
Brian Niccol, chairman and CEO of the Seattle-based chain, notified employees of the looming cuts on Thursday. He said moves follow a company study of its stores.
"During the review, we identified coffeehouses where we’re unable to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance, and these locations will be closed," Niccol said.
While Starbucks didn't say how many stores it plans to shut, Niccol said the chain will end the fiscal year with nearly 18,300 locations across the United States and Canada. Starbucks plans to further trim "non-retail headcount and expenses," according to Niccol, eliminating about 900 non-retail, or corporate, jobs and closing many open positions.
Starbucks is attempting to mount a turnaround under the helm of Niccol, who was recruited from Chipotle Mexican Grill about a year ago. As part of that effort, in February Starbucks announced it planned to eliminate 1,100 corporate jobs worldwide.
It comes as the coffeehouse sector has seen a surge of players, chains such as 7Brew and Dutch Bros., and the added competition is taking its toll.
Costs rise as some sales fall
But the company faces its own issues. Same-store sales have been on a decline. The costs of labor and coffee have risen. Some Starbucks stores have unionized. And some workers have bristled at the dress code and rules regarding customer service that Niccol has imposed.
Regarding the store closings, Niccol said Starbucks shutters locations for a variety of reasons, from financial performance to lease expirations.
"Since we’ve already opened numerous coffeehouses over the past year, our overall company-operated count in North America will decline by about 1% in fiscal year 2025 after accounting for both openings and closures," he said.
All the cost savings will allow Starbucks to refocus its resources, according to Niccol.
"These steps are to reinforce what we see is working and prioritize our resources against them," he said. "Early results from coffeehouse uplifts show customers visiting more often, staying longer and sharing positive feedback."
But Starbucks estimated it will incur about $1 billion in costs related to the store closures, severance payments and other restructuring activities, according to a regulatory filing on Thursday. Breaking down the costs, the chain said roughly $150 million is related to employee-separation benefits; about $400 million is related to the disposal and impairment of company-operated stores; and some $450 million is primarily associated with accelerated amortization of right-of-use assets and other expenses due to exiting stores before their leases expire.
In fiscal year 2026, Starbucks plans to expand its retail brick-and-mortar footprint and invest in the business, Niccol said.
"Over the next 12 months, we also plan to uplift more than 1,000 locations to introduce greater texture, warmth and layered design," he said.
Employees working in coffeehouses scheduled to close will be notified this week, according to Niccol.
Workers whose jobs don't require them to be on-site in the office were told to work from home Thursday and Friday.