Starbucks to close hundreds of stores, lay off 900 workers as part of turnaround plan

Starbucks said Thursday it's closing hundreds of stores in the U.S., Canada and Europe and laying off 900 nonretail employees as it focuses more of its resources on a turnaround.

The Seattle coffee giant said store closures would start immediately. Starbucks said affected baristas will be offered severance packages and transfers to other locations where possible.

The company wouldn't give a number of stores that are closing, but the bulk of the closures appear to be in the U.S. and Canada. Starbucks said it expects to have 18,300 North American locations when its fiscal year ends Sunday. As of June 29, the company had 18,734 locations.

In a research note Thursday, TD Cowen analyst Andrew Charles estimated Starbucks will close around 500 North American stores in its fiscal fourth quarter.

Starbucks said it will notify nonretail employees whose positions are being eliminated early Friday. Starbucks asked employees who can work from home to do so on Thursday and Friday.

‘Closing any location is difficult’

In a letter sent to employees Thursday, Starbucks Chairman and CEO Brian Niccol said a review of the company's stores identified locations where the company doesn't see a path to financial stability or isn't able to create the physical environment customers expect. Those stores are being closed.

“Each year, we open and close coffeehouses for a variety of reasons, from financial performance to lease expirations,” Niccol wrote. “This is a more significant action that we understand will impact partners and customers. Our coffeehouses are centers of the community, and closing any location is difficult.”

Bloomberg News reported that a portion of the closures may affect some of the small pickup stores that took only mobile orders. Other stores in that format will be converted to full-service cafes.

“That format is done,” Melius Research analyst Jacob Aiken-Phillips told Bloomberg about the mobile pickup-only stores. “They’re trying to build that whole third place where you can go sit down in the coffee shop.”

Starbucks said it expects to spend $1 billion on the restructuring, including $150 million on employee separation benefits and $850 million related to the physical store closing and the cost of exiting leases.

Closures follow union workers’ lawsuit over dress code

It was not immediately clear how many of the stores that are closing are unionized. Workers at 650 company-owned U.S. Starbucks stores have voted to unionize since 2021, but they have yet to reach a contract agreement with the company.

Starbucks Workers United, the labor group organizing workers, said Thursday that the closures were made without input from Starbucks' baristas. The union said it intends to engage in bargaining at every union-represented store that is closing to ensure workers can be placed at another store they prefer.

“Fixing what’s broken at Starbucks isn’t possible without centering the people who engage with the company’s customers day in and day out,” the union said.

News of the store closures arrived just over a week after unionized employees in three states sued Starbucks over its new dress code, saying the company refused to reimburse workers who had to buy new clothes.

Starbucks said it used a consistent set of criteria to determine the stores that are closing and union representation wasn't a factor.

CEO Brian Niccol trying to turn company around

Starbucks will end its 2025 fiscal year with 124 fewer North American stores than its previous fiscal year. It’s rare for Starbucks to shrink its store count during a fiscal year.

Starbucks plans to increase its North American store count in its next fiscal year, Niccol said. The company said it also plans to redesign more than 1,000 locations in the next 12 months to give them a warmer, more welcoming feel.

This is the second round of layoffs at Starbucks this year. In February, Niccol announced the layoffs of 1,100 corporate employees globally and eliminated several hundred open positions. At the time, Niccol said Starbucks needed to operate more efficiently and increase accountability for decisions.

Niccol is a turnaround specialist who was brought into Starbucks a year ago this month to give the brand a jolt. Under Niccol's leadership, the struggling Chipotle chain, where Niccol was CEO for about six years, essentially doubled its revenue and its profit, and its stock price soared.

In July, Starbucks reported its sixth straight quarter of lower same-store sales, as weak U.S. traffic continued to be a drain on the company. Niccol is trying to turn that around by adding staff, making stores cozier and introducing software that helps prioritize orders and make sure customers can get their drink within four minutes.