Starbucks is moving to shutter 1% of its stores and lay off nearly 1,000 employees as part of a $1 billion restructuring plan to make its business more profitable.
After posting sales declines for six consecutive quarters, the coffee chain is making cuts to prioritize long-term growth. CEO Brian Niccol announced the news in a company-wide memo on Thursday.
“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 wrote.
The executive did not disclose how many stores would be closed in the message, but he said nearly 18,300 Starbucks locations will remain by the end of the fiscal year later this month.
Based on the 1% decrease in the company’s total North American store count, between 150 and 200 underperforming locations are expected to close.
“Each year, we open and close coffeehouses for a variety of reasons, from financial performance to lease expirations,” Niccol said. “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.”
In a new filing with the Securities and Exchange Commission, the company says it expects to incur about $1 billion related to the store closures and other restructuring activities.
Starbucks will also be cutting 900 “non-retail,” or corporate, jobs and eliminating a number of open positions. Niccol noted employees will be notified if they’re affected by Friday morning and will receive severance packages to make up for the disappointing news.
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This is the latest setback to befall the coffee company. Earlier this year, it rolled out a new dress code policy that has been met with class-action lawsuits in Illinois and Colorado for refusing to reimburse employees who bought new clothing to abide by the new dress code.
In its latest quarterly earnings report, Starbucks reported a 3.8% revenue gain of $9.5 billion in the three-month period ending June 29. The company’s shares are down about 8% so far this year.
