Starbucks has announced that it will cut approximately 900 U.S. jobs and close its worst-performing stores in the U.S. and some in the U.K. as part of a cost-saving initiative. This restructuring follows a previous announcement in February to cut 1,100 jobs and simplify the U.S. menu in an effort to boost sales in its home market. Chief Executive Brian Niccol said the latest revamp is a “more significant action that we understand will impact partners and customers,” but also noted that the company is “on track” to open 80 new stores in the U.K. and 150 across Europe, the Middle East, and Africa this financial year.
In a letter to employees, Niccol explained that the stores marked for closure were “unable to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance.” The U.S. jobs being cut are support staff roles. In July, the coffee chain reported its sixth consecutive quarterly drop in sales at stores open for at least a year in the U.S., which is its biggest and most important market. The company’s shares have fallen more than 8% so far this year.
CEO Niccol’s Turnaround Strategy
Brian Niccol, who joined Starbucks as CEO last year after a successful six-year stint at Chipotle Mexican Grill, is leading a wide-ranging turnaround strategy in his first year with the company. His efforts have included remodeling stores to revamp seating and bringing back self-service condiment bars in an attempt to attract back dissatisfied customers. However, analysts at TD Cowen noted that despite these “aggressive actions,” U.S. sales face mounting competition from drive-through coffee shops and a “deteriorating perception of the chain compared with its rivals.”
The company is also facing a unionization campaign among baristas at its U.S. stores. Workers United, which represents employees at over 600 of Starbucks’ company-owned stores, is fighting for a contract agreement and has voiced concerns about under-staffing and overwhelmed baristas. In response to the restructuring announcement, Workers United said it was a sign that “things are only going backwards at Starbucks under Brian Niccol’s leadership” and that “new policies and major decisions [are] being made with zero barista input.” The union is sending a formal request for information to Starbucks about the planned closures.
What The Author Thinks
These deep cuts and store closures represent a high-stakes gamble for a company under intense pressure. While CEO Brian Niccol’s turnaround strategy is aggressive and may be necessary, it risks alienating employees and further damaging the company’s brand reputation. By making these decisions with “zero barista input,” the company is ignoring a key part of its business: the frontline workers who interact with customers every day. The success of this strategy will depend on whether these changes can truly solve the underlying problems of flagging sales and competition, or if they will simply lead to a more fractured and demoralized workforce. This is a crucial moment for Starbucks, and its actions will determine whether it can reclaim its dominance or continue to struggle against a changing market and its own internal discontent.
Featured image credit: James Maskell via Flickr
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