Hundreds Closed, Thousands Cut: Starbucks’ Painful Turnaround Goes Deeper Than Expected

TradingKey - Global coffee chain giant Starbucks (SBUX.US) announced on Thursday a $1 billion restructuring plan, including closing hundreds of stores and laying off 900 employees across North America. This marks Starbucks’ second major round of job cuts in 2025, signaling another decisive move in its ongoing efforts to cut costs, improve efficiency, and reverse six consecutive quarters of declining global same-store sales.

On Thursday, September 25, Starbucks said it will close about 1% of its locations in North America (U.S. and Canada) and reduce staff, part of CEO Brian Niccol’s “Back to Starbucks” transformation initiative — a turnaround strategy he pledged upon taking the helm one year ago.

The company said the $1 billion restructuring cost includes:

• $150 million for employee severance
• $850 million for store closure-related expenses (such as lease terminations)
• 90% of total costs concentrated in North America

Starbucks previously cut 1,100 jobs in February, but that move had little meaningful impact on financial performance. This second wave of layoffs was broadly anticipated by Wall Street analysts. Meanwhile, the company is actively working to revitalize its U.S. business through store design optimization and menu updates.

Starbucks has acknowledged that consumer hesitation over its rising prices and dissatisfaction with long wait times have contributed to six straight quarters of declining same-store sales.

In its Q3 FY2025 earnings report (calendar Q2), same-store sales fell 2%, worse than the expected 1.3% decline. However, positive sales growth in China — the first since late 2023 — provided some comfort to investors.

After the closures, Starbucks will operate approximately 18,300 stores in North America by the end of this month, down from 18,734 at the end of its third fiscal quarter in June. As of the end of last year, Starbucks operated over 41,000 stores globally and employed around 360,000 people.

Melius Research noted that Starbucks still has a long road ahead to regain momentum. In the current competitive and economic environment, the changes underway still don’t fully address the issue that its prices have become too high.

Starbucks’ stock fell 0.52% on Thursday, and is down 8.13% year-to-date. 

Given its weak financial performance, the relatively modest share decline may reflect market tolerance for the brand — and confidence in CEO Brian Niccol, who is known for turning struggling companies around.

TD Cowen analysts said the number of store closures exceeded expectations, calling it a sign of more aggressive actions within turnaround efforts.