7 Things to Know about Starbucks Closing 150 Stores
Starbucks intends to close down 150 of its stores in the U.S. during the 2019 fiscal year, due to weakening sales in the U.S. and in China. This is triple the number of stores it has closed in prior years on average. Most of the stores being closed are in urban parts of the country where rent and wages are high and Starbucks shops are in abundance.
With news of the sizable closure of stores, Starbucks shares have fallen nearly 9% since the market closed yesterday, bringing a share of Starbucks stock to be worth less than $53. According to The Wall Street Journal, “If the slide continues, it could result in the lowest market close for Starbucks since November 2016.”
Starbucks is not only taking steps backward by closing stores, but it also intends to slow down its growth, particularly the growth of its licensed Starbucks shops in retail stores such as airports and super markets.
The CFO of Starbucks, Scott Maw, states that he plans for Starbucks to actually benefit from the slowed growth of its licensed stores so that it can focus more greatly on the company owned stores. This is because company owned stores facilitate introducing more products and pricing them more consistently.
In the past 3 years, Starbucks has opened up over 2,000 new stores in the U.S., bringing its total to 14,300 U.S. locations. This is more than the number of McDonald’s locations in America, to give an idea of what a giant Starbucks is.
Sales at Starbucks in the U.S. has been slowing in recent years, and the company reportedly expects 1% same-store sales growth in the current fiscal quarter, which is well below analysts’ expectation of 2.9% growth. Still, Starbucks has a plan for expansion and to increase of sales. Chief Executive Kevin Johnson plans to grow in the Midwest and South regions of the U.S., and to attract customers “by expanding the company’s ‘digital relationship,’ with customers.” Already, Starbucks is on the right track by opening up its mobile order app to all customers, not just rewards program members.
Starbucks raised its quarterly dividend by 20% and plans to return $25 billion in dividends and buybacks to shareholders in the 2020 fiscal year. This is an ambitious $10 billion higher than its previously set goal.