Starbucks to close 600 underperforming US stores, cut as many as 12,000 positions

The company also announced Tuesday it expects to open fewer than 200 new company-operated stores in the United States in fiscal 2009. (Listen to the conference call.) Starbucks says the stores that will be shuttered are spread across all major U.S. markets with approximately 70 percent of them opened since the beginning of fiscal 2006. The company says it will try to place workers from closed stores in remaining Starbucks. (Wall Street likes the news; at last look, Starbucks' stock was up 6.5% in after-hours trading.) (Read the AP story   || Read Starbucks' press release || Read Starbucks CFO's prepared statement) 

Comments

[lattegal]

Yeah, all our SM's and ASM's were meeting with our DM today. I hadn't heard about the store closings when I realized they were all meeting. Maybe we'll have some info tomorrow. We're a solid store and are slated for a remodel in August. But just wondering about our district. We have some amazing partners!

[upod]

LatteGal, in that case, I don't know. The CFO didn't discuss that situation in the conference call. I'm guessing you won't close ( because he did say only *unprofitable* stores will close ).

If you're barely making your goals, then your still profitable - even if it's not by much. I'm guessing they're probably watching your store closely though.

He said in the call they're watching stores very closely right now for performance

[SBUX MNGR]

I sure feel for those that are losing their job. I bet they cancel the Leadership Conference! I will be disapointed but not surprised. I would also feel bad going due to the circumstances so if it happens maybe it can save some jobs!

PS. I do sometimes rely on spellcheck so if I miss a few words please excuse me.

[A]

Define unprofitable

[upod]

Unprofitable: Total money in ( Revenue ) is less than total money going out ( store lease, cost of sales & equipement, employee salaries, etc... )

[STARBUCKS GOSSIP WEBMASTER]

Thanks for following the conference call, UPOD.

[lattegal]

I bet they still have the leadership conference. Right now they are trimming the fat...the stuff that is just unproductive. Plus, they really should still have the conference. There's nothing like a leadership conference to encourage and motivate SM's, who in turn would do the same for their teams.

[upod]

No problem Webmaster. Glad to do it.

[upod]

I think they'll still have the leadership conference. If anything, to boost moral. Plus, they're probably already way into the planning for it.

At this point, it would probably cost more to cancel the conference than to follow it through.

I'm sure they already have it budgeted in.

[SBUX MNGR]

I like your positive outlook lattegal. I will give details of what happens in my conference call. However not as good at it as upod. They were quick at typing....me not so much. Plus I can't type and take the call at the same time

[Frustrated]

Unprofitable means that your stores total contribution is negative money. So after all costs, rent, cost of goods, taxes, payroll, etc, your store is in the red. Hence why it is new stores that are closing mostly, bc most new stores are unprofitable due to the amount of money it costs to start up a new one....whew.

[lattegal]

Thanks SBUX MNGR...yes, let us know what you hear.

Yes, UPOD you are right too about the conference. I'm sure they will have it.

[SBUX MNGR]

My store is new but in a great location. A bit slow right now but we will be in a back to school Frapp rush in several weeks.

[GuamiSwami]

We are having a conference call here in the Southeast...should be interesting. At least I'll hear some truth instead of the troll called "TRUTH" on this website.

[dmanagerla]

managers that have met with your dm's today... any word?

i saw my dm today, but nothing about cuts or closings. we are so focused on Sorbetto...

this past month, we lost one RMT DM, one 5 year DM, and one 1 1/2 year RD... all asked to leave...

[SBUX MNGR]

Upod was talking straight from a conference call no bull there Guamswami.

[upod]

Hey SBUXMNGR, I don't think Guamswami was referring to me. I think he's referring to someone else that post under the alias "Truth" on this site.

[Adios Starbucks]

I wonder if Starbucks asked any of the 12,000+ “partners” if they wanted to dissolve their “partnership” with Starbucks?

[mmmmkay]

conference call for us soon, too.

[cmbass]

so, all i know is that stores that are closing will find out tomorrow.... yes I am worried becuase I was blessed with a low volume mall store.... do i love my job even if i lose it... YES~ things need to be taken care of to get back on the right track~ ack

[SBUX MNGR]

Good luck everyone.

[cmbass]

yes yes good luck!!!

[cmbass]

my DM is brand new like a month my old of 3 yrs left and 3 close SM who have been 10+ "left" times are a rough right now

[GuamiSwami]

yes UPOD and SBUXMNGR...I love the passionate partners who comment and not so much the naysayers, non-believers, trolls and mean-spirited investors...I'm on the call now!!

[NEED TO KNOW]

Keep us posted GUAMISWAMI

[nycmgr]

How far is too far into the planning process. We were practically in Costa Rica when they canceled that one.

[NEED TO KNOW]

Emergency conference call now.

[will]

well I guess like many other companies it's time to get off the bus. Starbucks is going down and it's time to get another job.

[truth]

You can call me a troll all you want, but I'm one of the few who has consistently been warning people of bad things to come.

I don't wish for it to happen. But it is inevitable.

As I've said all along, there's more slashing to do between now and AUG 11 (Peltz Day). Look for the Jul 30 earnings day to be wrapped with another round of cuts. That's how they work. You hide the bad earnings report with another round of cuts.

SSC must be next.

And just because they aren't closing licensed stores NOW, doesn't mean they are off the table. They could easily close ALL licensed stores, calling them 'dilutive to the brand'.

Clover factors in here somehow. A much small sbux, branded as the upscale coffee alternative to MCD and Dunkin? Who knows. (Actually some people do know.)

The timing of these cuts is really odd. There must be more to come. It made no sense to announce the cuts today. It doesn't fit into the news cycle.

And, yes, my money is on the leadership conference still happening. As I've said all along, they are gonna whack deep this summer and then use the leadership conference as the 'healing moment' to rally the remaining staff.

And, finally, good luck to everyone tomorrow.

[DM]

There is still more to come this won't be the last of the cuts, remember the transformational agenda will be complete at the end of fiscal year FYO8. I also heard they will be cutting back on district manager positions, going from 8 to 10 stores per DM to 13 to 15 stores per DM.

As for the store closures they won't tell which stores are closing until
just before closing them. The RD's and DM's will know but will not share until it's time to close the stores.

[back at the 'Bux]

Man, I KNEW the arrival of that store closing manual was a harbinger of bad things to come... good luck everyone! Keep loving the job and the customers, if not the people in charge of the company.

[SBUX MNGR]

Yes they are saying leadership will still take place.

[juliaaja]

Honestly, with what baristas make an hour, especially for the part timers, a lump sum severance may be the best thing that ever happened to them. I know for myself I could get a new sbux job in a few weeks, but that kump sum check would really help out around here now. I figure it would be about a months pay, and I could certainly use the $500!

[coffeecustomer]

This should not be news to anyone.

The investors are running the show now. It\'s very clear on that point.

Any company (especially a public one with real, live investors) has a duty and obligation to be profitable. Sure, they can run for sometime and be unprofitable due to economic situations or expansion, but ultimately, the investors will demand accountability from the company and their management.

It seems that Howard has been running the show from the perspective of 1999-2003, when sales were soaring. Buying companies out (Clover), spending cash on a \"training meeting\" a la PR stunt and holding expensive gatherings for the company\'s own people are all examples of this. It is about time Schultz take care of his investors. Closing these stores is the best, most decisive, bold move he\'s made since he returned. It communicates very clearly that this company is now serious in it\'s obligation to return to profitability.

Yeah, it sucks hard that there will be people laid off. But, as they say, that\'s business.

To those who think the folks who are siding with investors are \"trolls,\" I have just this to say to you: it\'s very commendable that you\'re so dedicated to your company, but it seems your company isn\'t as loyal to you as you think. These folks are unbiased observers who are not loyal to anything but themselves, and, being an investor, that means making a profit from your investment.

Why is it that you keeping your job (a prime example of you trying to take care of yourself) is more noble than these investors making a profit from their investment (another example of someone trying to take care of themselves)?

[scaried to be jobless]

So my store was close down for 2 hours a few weeks ago for a mandatory meeting and we just lost our asm because we didn't have enough money to keep her(we were $1000 short) do you think my store might be closed

[SBUX MNGR]

The stores that will be affected in our area will be notified tomorrow personally by the RDO. All stores in our area will be notified by 7/11/08 wether they will stay open or close. Good Luck everyone, I am quite sure I will be staying open as I said we are doing well and only been open for half a year. I still will have a rough time sleeping tonight. I go on vacation Thursday.

[LAPartner]

They should lay off all of the old farts they brought back to the SSC. There is no originality, only re-treads, and the customers are feeling the pain. And we have to smile and serve blended lemonades and sorbettos like a Baskin and Robbins store. It is getting embarrassing.

[Jennifer Cabala]

I'm a reporter at Q13 in Seattle, working on this story. If you are a Seattle area employee and want to talk about this please email me at jcabala@tribune.com Thanks.

[reedc000]

Oversaturate the market, encourage competition and then give up... Sounds like a smart business plan to me. And don't get me started about getting rid of the drive throughs! What a joke - the drive throughs are a huge attraction - they're for busy people who want coffee. Get rid of them and everyone will just drive through Dunkin Donuts. What about Keurig machines? Anybody at Starbucks ever consider making a Starbucks brand K cup???

[Tony]

A Store is profitable if the expenses are in line, not just meeting Sales Targets. If your Store is meeting sales but spending too much on Labor, Pastry, Paper, Roasting Plant, etc., it will not be profitable. If your store does not make Controllable Contribution Targets month after month, it is losing money. The P&L will determine which Stores will remain and which will close. If your Manager has not been held accountable for "Controllable Contribution" before, they will be going forward......

[Sheik]

(Half-serious about this...)

I blame this whole 600 stores disaster on ...

BREAKFAST SANDWICHES!!! and the amount of $$$$$ that was spent on those friggin 10-grand+ ovens that went into all the stores.....

Please tell me others agree?
No?

[jah]

just a question, how much harder is it going to be after all this happens for part time employees to maintain the necessary 20 hour average to maintain benefits with some of that 12000 affected employees relocating to other stores and taking away available hours?

[Teresa]

Is there a list somewhere of the stores that are closing?

[SBUX MNGR]

The RDO for our area just got her list and will notify closing stores tomorrow. I can actually absorb a few at my store, I was getting ready to hire two people so I will wait on it so that I can help others out.

[Customer]

Wonder how the loyal customers will feel about Starbuck's when their favorite store closes.

Starbucks talks about wanting to make its stores part of the community. . .

[SBUX SS]

Well, I just found out about this after my SM got off a conference call a couple hours ago.

I am worried because our store opened in May of last year, we just lost our ASM because we couldn't afford him, and we are not terribly busy.

Also, if we close I think it will be harder to place me because I am a new Shift Supervisor.

I guess I will know either tomorrow, or at least by mid-month! :(

[P.R.I.D.E.]

We all (in the US and other first world countries) have been living in the days of "everything will always go up" for the past 5 years, and I don't hold Starbucks any MORE responsible than every other consumer and investor who personally believed in the mantra (myself included). Look at housing, stocks across the board, practically every sector has been living in la-la land and now we're all going to pay for it.

These last 5 (and next 5) years will make for great economics class discussions. I don't blame any one person, entity, or institution, I blame all of us. All of us who have overconsumed, who have overlooked reality, and who have been obsessed with the "stuff" in our lives.

The challenge here is that we have built our company on the premise of personal (gluttonous) reward. If Starbucks becomes JUST about the coffee/frappuccino/etc, we'll be in trouble.

I truly believe that it has to go back to the human network of life. With the advent of the internet, I truly believe that we all don't even realize how disconnected we've become. We have to start really paying attention to the customer right in front of us. We have to get to know the people who visit our stores. Forget about looking at this from a macro level, it's all about the human network at this point, that will help us survive.

And it will take genuine, authentic, mature partners to make the spark happen, again and again. So my hope is that it will be THIS criteria that determines who stays and who goes (although it will be difficult to measure).

[laasm]

All stores in West LA/ Santa Monica are safe. I would imagine that all Sorbetto Stores are safe.

[Melody]

Very selfishly of me, I hope that no stores in Seattle close.

My heart goes out to EVERYONE who loses their job because of this.

[Jack Johnson]

I have a feeling that liscensed stores do pretty well considering many of them have built in markets like Barnes and Noble or Target. Obviously the company overestimated demand for their product... lower middle class people in middle america are turned off by the "fancy" Overpriced" coffee. I also think that a carb conscious america does not want indulge in the sugary treats of starbucks. You can't jam it down people's throats.