Starbucks to Close 150 Underperforming Stores, Hike Dividend

Sheila Mcguire
June 21, 2018

Closing stores is not new for businesses, but the 150 figure is almost three-times the average for the company.

The company said comparable sales growth at existing stores, a key measure of retail performance, was expected to be just 1 percent in the current quarter, despite a booming economy and a broadly healthy restaurant industry.

The company anticipates lower net new store growth in the United States for fiscal 2019 and said it would take steps to address rapidly changing consumer preferences by introducing new beverages, focusing on growing health and wellness trends.

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Historically, the company closes around 50 stores a year, the company stated in a press release.

In China, CEO Kevin Johnson said that as delivery has grown more popular, a glut of third-party services was contributing to a bad customer experience; he also said that aggressive expansion there might have contributed to some "cannibalization". Investors cheered as Schultz retook the helm and closed some underperforming stores, and share prices at the chain have been up eight of the last 10 years. Most of the new locations it opens will be in underserved markets.

For the ubiquitous chain, moving slower and shutting unprofitable stores may trigger some deja vu.

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In March, Rosalind Brewer, Starbucks' COO, also said the market for vegan food was significant and that the company was working on launching more plant-based food and drinks. "Sometimes, companies feel they need to reinvigorate their strategy".

Earlier this month, Howard Schultz stepped down as president, which fueled reports that he was gearing up for a 2020 presidential run. The company said that so far in 2018, Frappucino sales have fallen by 3 percent. The overall number of stores will continue to increase, but that growth will be focused.

'At least in the Starbucks heavy markets, the people that are going to drink coffee are already drinking it'.

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