Starbucks to Close 250 Stores in North America This Week, About 1% of Over 18,000 Locations
Starbucks submitted documents to the U.S. Securities and Exchange Commission and released a letter to employees, announcing the closure of approximately 250 underperforming stores in North America this week, which accounts for about 1% of over 18,000 locations in the region. COO Mike Grams stated in the letter to partners that a review of the portfolio identified some locations that could not consistently deliver the experience or see an acceptable financial path. The list of closures has not been disclosed, nor has the breakdown between the U.S. and Canada or the proportion of unionized stores.
This will incur approximately $300 million in restructuring costs: $200 million for early lease terminations and employee severance, and $100 million for the disposal of store assets. The fiscal year net new store opening expectation has been revised down from 600-650 to about 440, with most growth coming from international markets. Same-store sales in North America increased by 7.9% last quarter, exceeding Wall Street's expectation of about 5.7% and the 6.2% in the second quarter. Grams noted that the growth has allowed headquarters to see the performance of each store, with most benefiting and a few still lagging behind.
This marks the second round of large-scale store closures in North America during CEO Brian Niccol's two-year tenure. A year ago, a batch of stores was closed, with a restructuring cost of about $1 billion, including iconic locations like the Seattle roasting facility. Niccol, who came from Chipotle, has a strategy called "back to Starbucks," focusing on reducing wait times, simplifying the menu, and bringing back seating and a sense of stay. The company stated it aims to complete upgrades for at least 1,500 stores by the end of the fiscal year, with acceleration planned for fiscal year 2027. Affected employees will be internally reassigned wherever possible, and those who cannot be placed will receive severance. Since the end of 2021, over 700 stores in the U.S. have voted to form unions, but labor agreements have yet to be reached.
There were approximately 18,371 stores in North America last quarter, down from about 18,734 a year ago, with closures contributing to the decline in the total number in the region. The company still claims there is a long-term pipeline for store openings in North America and announced plans to establish a technology center in India next year. eToro strategists noted that this is a reasonable but costly step, and if sales and profit improvements stagnate, investor patience may quickly run out.
Mechanically, the stores being closed are those with poor leases, low foot traffic, or experiences that do not meet standards, while the focus is on concentrating capital and partner resources on upgradeable locations with potential for same-store sales growth. The event-driven strategy is to clean up the portfolio before the end of the fiscal year, changing the net store opening numbers to "fewer poor stores, more upgraded good stores." Funds from the closure costs are being used to reduce leasing liabilities and provide a cleaner same-store sales metric; benefiting are the remaining high-potential stores and upgrade contractors, while the affected communities face rental and part-time job losses, as well as outdated expectations that equate store count with growth. International net openings are used to maintain the narrative of global expansion, while North America is first undergoing a subtraction process.
Source: Public Information
ABAB AI Insight
Niccol is transforming Starbucks using Chipotle's approach of "fewer stores, faster service, and a place to sit," having closed stores and spent about $1 billion on restructuring in the first year, followed by another 250 closures and $300 million in the second year. The numbers are smaller, but the logic remains unchanged: within North America's 18,000 stores, there will always be a subset that fails to create a third space or achieve drive-thru efficiency. Same-store sales have turned positive at 7.9%, allowing headquarters to remove poor-performing stores from the denominator during earnings season; otherwise, closures would be interpreted as a collapse in demand. The 1,500 upgrades and 250 closures are two sides of the same coin: seating and green apron service require space and resources, while stores with poor leases do not merit this capital expenditure.
The capital pathway is "one-time closure costs—lease releases—upgrading stores." The $200 million for lease terminations and severance reflects the present value of future rent and wages; the $100 million in asset write-offs acknowledges sunk renovation costs. The net openings have been revised down from 650 to 440, with the growth narrative shifting to overseas markets and single-store quality. Unionized stores have not been disclosed separately, and if the closure list includes stores that have voted for unions, labor negotiations will face an additional front. The technology center in India is aimed at offshoring backend and digital capabilities, thickening North America on the store side while thinning out the backend.
Comparisons can be drawn to McDonald's closing inefficient stores to improve experience stores, as well as retail chains proactively shrinking their footprint after achieving same-store sales growth: both use closures to demonstrate that management can distinguish between good and bad stores. Two rounds of closures, each around 1%, indicate that portfolio reviews have become institutionalized and are not merely a one-time crisis cleanup. The industry phase has shifted from "expanding to every corner" to "the third space must justify the rent." Those who can manage wait times and seating simultaneously will remain; those left with only takeout windows and poor leases will find themselves on this week's closure list.
ABAB News · Cognitive Law
Only after same-store sales turn positive can closures be seen as management rather than survival.
The growth narrative for chains has shifted from the number of openings to the list of closures.
One-time restructuring costs buy the right to remove poor stores from the denominator.