SEATTLE — Global coffee behemoth Starbucks has announced a sweeping $1 billion restructuring plan for its North American operations, targeting hundreds of underperforming stores and eliminating approximately 900 non-retail corporate jobs. The dramatic measures follow six consecutive quarters of declining comparable store sales in its biggest market, underscoring the challenges faced by CEO Brian Niccol, who has been pushing a turnaround strategy since his appointment last year.
The company’s restructuring efforts are explicitly aimed at locations identified in a recent portfolio review that are either "unable to create the physical environment our customers and partners expect" or lack a viable "path to financial performance," Niccol stated in a memo to employees. The closures will see the North American store count, which stood at 18,734 at the end of June, shrink to an estimated 18,300 by the fiscal year's end. Among the high-profile casualties are a Reserve store at the Seattle headquarters and the flagship Capitol Hill Reserve Roastery.
This is the second major round of layoffs this year, following 1,100 corporate job cuts in February. The current action to eliminate roughly 900 non-retail positions, coupled with the store closures, is projected to incur nearly $1 billion in costs. This includes $150 million for employee severance and a hefty $850 million for restructuring charges related to the physical store closures and accelerated lease expenses.
The motivation behind this aggressive retrenchment is clear: financial strain. While overall revenue increased by a modest 4% in the second quarter, net income plummeted by a steep 47%. The company’s stock has shed nearly 13% of its value over the past year. Industry analysis, including that from TD Cowen analyst Drew Charles, points to growing consumer frustration over high prices and extended wait times as a primary driver of the sales slump.
The competitive landscape is also playing a critical role. Although Starbucks remains the dominant coffee chain, with its revised North American store count significantly outpacing competitors like Dunkin', it is facing mounting pressure from rapidly expanding, drive-thru-focused rivals such as Dutch Bros and 7 Brew. These new entrants are successfully chipping away at market share by offering convenience and competitive pricing.
Starbucks has assured that store-level partners affected by the closures will be offered transfers to nearby locations where feasible, or comprehensive severance packages. Niccol framed the decisions as necessary to build a "better, stronger, and more resilient Starbucks." While the immediate impact is a shrinking footprint, the company intends to pivot and return to net unit growth in fiscal year 2026, signaling that this costly overhaul is the price of future revival.
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