Starbucks to close 150 US cafes to combat slowing growth

Adjust Comment Print

Starbucks said it traditionally closes about 50 underperforming locations annually.

In a statement, Starbucks CEO Kevin Johnson said that the company's recent growth-expected to hit just 1 percent in the quarter beginning next month-is "unacceptable" and the company will need to "move faster", in order to meet the needs of customers. Stock for the company dropped as much as 5 percent in after-hours trading.

The company anticipates lower net new store growth in the United States for fiscal 2019 and said it would address rapidly changing consumer preferences by introducing new cold drinks like a mango dragon fruit beverage and focusing on growing health and wellness trends.

Morgan Stanley analyst John Glass, who downgraded the stock to "equal-weight" from "overweight", expressed surprise at Starbucks' expectations for China, and said the overall forecast raised questions about the sustainability of Starbucks' growth back home.

Although business overseas has been booming and the chain has been opening more and more cafes, US sales growth has stalled for the company that brought espresso to the masses.

The coffee chain, which is still shaking off the backlash caused by the arrest of two black men in a Philadelphia store that led to the chain shutting down its stores for sensitivity and bias training, says it's pulling back new store launches in urban areas where coffee chains are abundant.

Why are so many stores closing? Starbucks said it would provide additional details on its plans at an investor presentation on Tuesday afternoon.

Starbucks' Executive Chairman and co-founder Howard Schultz said earlier this month that he is stepping away from the company on June 26, ending an era. Its global comparable store sales increased 2 percent.

Starbucks said it would look to open more stores in under penetrated markets and explore strategic options to license company-operated stores. Additionally, it plans to cut general and administrative costs, and has hired a consultant to help in this area.