Coffee juggernaut Starbucks is closing up to 400 of its North American stores over the next 18 months, while simultaneously accelerating plans to open around 300 new locations focused on carryout and pickup.
Embedded within its latest 8-K filing with the Securities and Exchange Commission, Starbucks provided an update on its closure-and-expansions plans, which were “temporarily paused” due to the COVID-19 pandemic.
“This reflects the accelerated repositioning of a number of company-operated stores as we blend store formats and strategically optimize our portfolio primarily in U.S. urban markets as outlined above,” Starbucks said in its 8-K. “This repositioning will include the closure of up to 400 company-operated stores over the next 18 months in conjunction with the opening, over time, of a greater number of new, repositioned stores in different locations and with innovative store formats, yielding a U.S. portfolio that is optimized to enhance the customer experience, expand our retail presence and enable profitable growth for the future.”
During a normal year, Starbucks typically closes around 100 company-operated stores in North America due to lease expirations, trade-area shifts and other market conditions, so this type of churn is not new, but the increased focus on to-go-only locations without traditional cafe-style dining rooms is.
“Although we expect this portfolio optimization will yield net new-store growth for the Americas in fiscal 2021, this will have a moderately negative impact on Americas revenue through next fiscal year. Beyond fiscal 2021, we expect our targeted 3%-4% Americas net new-unit growth model to remain intact, with improved profitability,” the company said in its filing.
The U.S. store portfolio transformation includes the expansion of new Starbucks Pickup stores in dense markets, including New York City, Chicago, Seattle and San Francisco, and convenience-led enhancements, such as curbside, drive-thru and walk-up windows in suburban areas.
In an email to CNN Business, the company said nearly 80% of its transactions in the U.S. are “on-the-go”purchases, and that each large American city would have a mix of traditional cafe-style locations and Pickup locations.
The first Pickup store has been operating in Penn Plaza in New York City since November 2019, and soon a second location will open at 42nd and Park near Grand Central Terminal.
With approximately 96% of its global company locations back open—including 95% in the U.S., 88% in Canada and 99% in China—Starbucks expects comparable store sales will “substantially recover” by the end of the fourth fiscal quarter, following a 50% decline during the second quarter.