Starbucks to close 150 stores as sales growth cools

21 June, 2018, 00:26 | Author: Conrad Doyle
  • Starbucks Announces Major Store Closings Coming in 2019

Starbucks announced that it will close 150 underperforming stores this year amid slowing sales - three times the amount it typically shuts down per year.

Starbucks has not yet announced which stores will be closing.

"While certain demand headwinds are transitory, and some of our cost increases are appropriate investments for the future, our recent performance does not reflect the potential of our exceptional brand and is not acceptable", Starbucks Chief Executive Officer Kevin Johnson said in a statement.

In early May, Swiss-based Nestle (NESN.S) said it would pay Starbucks $7.15 billion for exclusive rights to sell Starbucks coffees and teas.

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Meanwhile, sales are expected to grow just 1 percent in the next quarter.

"The competitive environment has really become a lot stronger in the U.S". In the past year, Starbucks has opened nearly 1,000 new stores in the Americas, which includes the U.S., Canada and Latin America.

"We're putting more of our energy into that afternoon day part and the portfolio of beverages that are offsetting some of the declines we're seeing in Frappuccino beverages", Johnson said.

The chain is also relying on its digital initiatives to contribute between 1 and 2 percent to comparable sales next fiscal year.

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On Tuesday, Starbucks said that it will return more cash to shareholders-about $25 billion in buybacks and dividends through fiscal 2020, representing a $10 billion increase from the previous guidance.

Johnson said Starbucks has not reached saturation point in the USA, but it will be more strategic about where it puts new stores, focusing on underpenetrated markets in "Middle America".

The company also said it would look to cut general and administrative expenses with plans to partner with an external consultant to speed up the process.

For a chain that has so many stores that they often in sight of each other, Starbucks said Tuesday is finally ready to pull the plug on more of its losers.

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