• Starbucks to Close, Reformat Stores

    Starbucks to Close, Reformat Hundreds of Stores

    Coffee Chain Seeks to Scale Back Expansion Plans

    Starbucks said it will speed plans to "transform" its roughly 10,000 corporate owned locations because of the coronavirus pandemic, which made North American consumers preference for convenience even more pronounced. (Starbucks)
    Starbucks said it will speed plans to "transform" its roughly 10,000 corporate owned locations because of the coronavirus pandemic, which made North American consumers preference for convenience even more pronounced. (Starbucks)

    Coffee chain Starbucks is planning to close at least 600 stores across North America in the next two months to catch up with consumer demand in the pandemic for online orders, fast pickup lines and delivery service rather than the sit-down coffeehouse experience.

    The Seattle-based chain's changes will be most noticeable in big cities, including San Francisco, Chicago, and New York City, though Starbucks locations in the Big Apple are almost all still closed. As of the end of its last full fiscal year, which ended in September, Starbucks had a total of 18,067 stores in North America. Of those, about 55% were corporate-owned and managed.

    “Starbucks stores have always been known as the ’third place,’ a welcoming place outside of our home and work where we connect over a cup of coffee,” Starbucks CEO Kevin Johnson said in a statement. “As we navigate through the COVID-19 crisis, we are accelerating our store transformation plans to address the realities of the current situation."

    The mass reformatting of its stores was already in the works before the coronavirus pandemic began, the company said on Wednesday, but the social distancing necessitated by the outbreak reinforced these trends in customer behavior so Starbucks has sped up its timeline.

    In-store transactions fell from about 40% of Starbucks total sales before the pandemic to no more than 10% in the last week of May at its company-owned stores, with 90% of its business done through the drive-thru window and mobile-order-and-pay system. That drop came even as 95% of its stores had reopened.

    The company announced the move in a filing Wednesday with the U.S. Securities and Exchange Commission, in which it also provided a brief but bruising preview of its third-quarter earnings report that is scheduled for July 28. Starbucks said its revenues for the current quarter have declined by about $3 billion, and though its sales had improved they were still significantly lower than they had been before the coronavirus hit.

    Sales for April fell 63% over the same month in 2019, the company said. Sales in May were a bit better than April, but still 43% less than May 2019.

    "Given our financial strength as an enterprise and the steady recovery progress we have observed to date, we remain confident in our ability to maintain appropriate liquidity through the current crisis," company executives wrote in the filing, noting that Starbucks had $2.6 billion in cash and access to short-term credit of as much as $3.5 billion, just in case.

    Nevertheless, Starbucks plans to cut discretionary spending and significantly curtail its capital spending budget for the year. The company now anticipates the opening of 300 new stores by the end of its fiscal year, down from its original slate of 600