Starbucks pulling the plug on 150 underperforming stores


The affected stores are mostly in urban areas densely populated with Starbucks locations, CNN Money reports.

The coffee behemoth is retrenching in its home market as it contends with sales growth that Chief Executive Officer Kevin Johnson acknowledges isn't fast enough. The overall number of stores will continue to increase, but that growth will be focused.

The closing stores are often in "major metro areas where increases in wage and occupancy and other regulatory requirements" are making them unprofitable, Johnson said. Starbucks will borrow to finance the buybacks, Maw said.

Meanwhile, sales are expected to grow just 1 percent in the next quarter. Americans can "get that same flavor profile at a much lower price somewhere else".

FILE PHOTO: A Starbucks store is seen inside the Tom Bradley terminal at LAX airport in Los Angeles, California, U.S. on October 27, 2015.

Outgoing Starbucks chairman Howard Schultz acknowledged at the time that the racial bias training closures would cost "tens of millions" but that he saw the closures as an investment in Starbucks employees. Starbucks closed its USA stores on May 29 to conduct racial-bias training for its employees. It says it is going to concentrate on opening stores in markets that have fewer locations.

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"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.

Closing stores is not new for businesses, but the 150 figure is almost three-times the average for the company.

The chain, which operates more than 8,000 US stores, said the changes were made to address the weaker-than-expected sales growth, adding that several digital initiatives were expected to add 1% to 2% in comparable sales in fiscal 2019.

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

Starbucks said it now expects earnings in the range of $3.23 to $3.26 a share for the current fiscal year, down about a dime from its previous targets.