Starbucks to close 400 stores, but expand pickup options

 Starbucks will be closing 400 company-owned stores while expanding its "pickup" store concepts. (Source: CNN)
Starbucks will be closing 400 company-owned stores while expanding its "pickup" store concepts. (Source: CNN) (GIM)
Published: Jun. 10, 2020 at 2:03 PM CDT
Email this link
Share on Pinterest
Share on LinkedIn

Starbucks will close 400 company-owned stores while expanding its “pickup” store concept and access to curbside pickup, drive-thru and walk-up counters over the next 18 months.

“We are now envisioning the accelerated development of Starbucks Pickup stores in major U.S. cities over the next 18 months, including retrofitting and repositioning many existing cafés to expand our store portfolio with a mix of appropriate store formats,” the company noted in an SEC filing.

The coffee company said in a news release that the changes are being made “due to a retail environment that has shifted because of COVID-19."

Starbucks also expects to lose more than $3 billion in revenue in its fiscal third quarter due to the new coronavirus, but said the disruption to its business should subside through the rest of the year.

“The Starbucks brand is resilient, customer affinity is strong and we believe the most difficult period is now behind us," Starbucks President and CEO Kevin Johnson said in an open letter.

The Seattle-based coffee giant said in a regulatory filing Wednesday that the virus outbreak will also slash its operating income between $2 billion and $2.2. billion for the quarter, which ends June 28. Starbucks plans to report its third quarter results on July 28.

Starbucks was forced to close its stores to customers at the height of the pandemic but continued to operate drive thru and pickup in many locations. The Seattle company said 95% of its 8,000 U.S. company-run stores are now open with varying levels of service, just slightly lower than operations globally.

Starbucks said U.S. same-store sales, or sales at locations open at least a year, improved for six consecutive weeks through the end of May. They fell by 32% the last week in May, compared to a 65% decline at the pandemic's height in mid-April. The company says it expects a 10% to 20% decline in U.S. same-store sales for its full fiscal year, which ends Sept. 27.

In China, where the pandemic hit first, same-store sales were down 14% at the end of May. That compares to a 78% decline in February. Starbucks said most stores in China have returned to pre-pandemic operating hours and 70% are now offering full cafe seating.

Starbucks provided a preliminary estimate for a third-quarter adjusted loss of about 55 cents to 70 cents per share. Analysts polled by FactSet predict a loss of 16 cents per share.

For the fourth quarter, Starbucks said it anticipates earnings of 15 cents to 40 cents per share. Analysts were predicting earnings of 38 cents per share.

With many workers still at home and customer traffic patterns shifting, Starbucks said it's accelerating a plan to build smaller, pickup-only locations in major U.S. cities. It's also retrofitting some cafes to better accommodate mobile pickup and delivery orders.

Starbucks opened two pickup locations in New York and Toronto over the last seven months. It had planned to open more over a three- to five-year time period, but has pushed that timetable to the next 18 months. Starbucks said 80% of U.S. Starbucks transactions even before the pandemic were to-go orders.

Shares fell 5% to $78.55 in morning trading.

Copyright 2020 Associated Press. Gray Media Group, Inc. contributed to this report. All rights reserved.

Latest News

Latest News