Monday, 23 July, 2018

Starbucks closing 150 underperforming stores in 2019

Starbucks says it will close 150 poorly performing stores next year Starbucks says it will close 150 poorly performing stores next year
Michele Schwartz | 21 June, 2018, 00:26

Investors reacted to news that Starbucks could experience its worst performance in about nine years by sending the shares down 3.8% in pre-market trading.

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.

Starbucks announced that it will be closing about 150 "underperforming company-operated stores in its most densely penetrated markets" in the 2019 fiscal year.

According to Andy Sookram, who tracks the company for S&P Global, the issue is that sales at Starbucks locations open at least a year - an industry measure that takes a chain's unit growth into account - aren't as brisk as they historically have been.

Starbucks cut its earnings outlook and plans to close more under-performing stores as part of a multi-pronged response to what chief executive Kevin Johnson called an unacceptable level of same-store sales growth Tuesday.

Starbucks CEO Kevin Johnson released a statement regarding the current status of the company.

The world's largest coffee chain is facing competition both from upscale coffee houses and lower-priced fast-food chains like McDonald's Corp (MCD.N) and Dunkin' Donuts (DNKN.O).

It has missed analysts' estimates for same-store sales in the US -dominated Americas region in five of the last six quarters. "We must move faster to address the more rapidly changing preferences and needs of our customers".

The former Chairman Howard Schultz stepped down earlier in June. China is the company's biggest growth driver with same-store sales rising 4 percent in the last reported quarter.

In early May, Swiss-based Nestle said it would pay Starbucks $7.15 billion for exclusive rights to sell Starbucks coffees and teas.

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