Starbucks says it will close 400 U.S. stores over the next 18 months, an acknowledgment that the coronavirus (COVID-19) pandemic has brought lasting change to its business model.
The chain is shifting away from the traditional coffee house concept -- a shift that has slowly evolved since stores added drive-thru window service a decade ago. As part of this evolution, Starbucks is opening some new stores and converting others to what it calls “convenience-led” formats.
These locations will offer drive-thru and curbside pickup options, as well as Starbucks Pickup locations. A major aspect of these stores will be the Starbucks App, which allows customers to order and pay before arriving at the location.
“Starbucks stores have always been known as the ’third place,’ a welcoming place outside of our home and work where we connect over a cup of coffee,” said Kevin Johnson, CEO at Starbucks. “As we navigate through the COVID-19 crisis, we are accelerating our store transformation plans to address the realities of the current situation, while still providing a safe, familiar and convenient experience for our customers.”
The changes include an expansion of Starbucks Pickup stores in heavily populated areas like New York City, Seattle, San Francisco, and Chicago. The convenience-led enhancements such as curbside, drive-thru, and walk-up windows will focus on suburban areas.
Changing store layouts
Starbucks said it will also renovate some store layouts and add a separate counter for mobile orders at high volume stores, facilitating efficient product delivery.
The announcement of the changes was part of the company’s report on sales in the current quarter in which it expects sales to be down $3.2 billion. While not offering firm guidance, Starbucks said it expects to lose 55 to 70 cents a share when it next releases earnings.
“These numbers are a lot worse than the Street was expecting,” Michael Halen, senior restaurant analyst at Bloomberg Intelligence, told Bloomberg News. “People expect some sort of crazy snapback but it’s not going to materialize in restaurants.”
Even though it’s closing 400 existing stores, Starbucks still plans to open at least 300 new locations this year, though that’s about half the number planned before the pandemic struck.