Starbucks Is Closing 150 Underperforming Locations

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Starbucks, the world’s largest coffee chain, is set to close 150 US stores in 2019.  That’s triple the historical average, and the news comes at a strange time for the company, with Executive Chairman and Starbucks Co-Founder Howard Schultz having just stepping away on June 26.

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The Starbucks stores in question haven’t met experts estimates for sales in the US for five out of the last six quarters.  That could mean that Starbucks could be struggling with too many stores in the US – the company has projected same-store growth of only 1 percent for the third quarter in 2018.  Most of the closings are set to affect those underperforming stores in densely populated urban centres.

On a recent earnings call, President and CEO Kevin Johnson cited the company’s decision to close 8,000 stores for an afternoon of racial bias training as a connection with the 1 percent growth rate.  In April, there was public outcry after a Starbucks employee called the police on two black men waiting in the store for a business meeting.  Both men were arrested.

“Our recent performance does not reflect the potential of our exceptional brand and is not acceptable…We must move faster to address the more rapidly changing preferences and needs of our customers.”

– President and CEO Kevin Johnson

A bevy of research suggests consumer preference are to blame for the slow down in business.  According to Label Insight, 67 percent of Americans prioritize healthy or socially-conscious food choices for 2018, with half of those citing a desire to purchase less sugary foods.

A Neilsen study also found that seven in 10 consumers say they’re concerned with whats in their food, and there’s a trend of consumers paying attention to products that are free from things like artificial colours, hydrogenated oils and more.

Starbucks has taken those consumer trends into it’s account for 2018, with several new items that have fewer than 100 calories.  The chain also plans to increase it’s digital efforts to reach consumers, which accelerating growth for 2019 in under-saturated markets both domestically and abroad.  Currently, the most significant driver of growth for Starbucks is China, where a new store opens every 15 hours.

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