Seattle-based Starbucks will close more than 600 of its coffee shops beginning this summer, the company has announced. One of the major reasons for the downsizing, apparently, is too many Starbucks stores too close together. The company had previously announced a plan calling for the shuttering of just 100 underperforming units.
The 600 store closings amount to about 5% of the company’s total U.S. locations, with most of the closures involving units that have opened since 2006. Chief Financial Officer Pete Bocian said during a conference call that Starbucks is closing 19 percent of all U.S. company-operated stores that opened in the last two years.
Closings to Begin This Month
Starbucks officials said the closures will occur in “all major U.S. markets” between late July, 2008, and March, 2009. “By far, this is the most angst-ridden decision we have made in my more than 25 years with Starbucks,” CEO Howard Schultz wrote to employees in a message appearing on the company’s Web site.
The company has admitted that overexpansion was a chief reason for the growing number of unprofitable stores. During the conference call, CFO Pete Bocian said that between 25 and 30 percent of a Starbucks shop’s revenue is cannibalized when a new store opens nearby, and that the closures should help return some of that revenue to the remaining stores.
About 12,000 workers, or 7 percent of Starbucks’ global workforce, will be affected by the closings, spokeswoman Valerie O’Neil said. Company officials said it will attempt to find jobs for people within existing Starbucks, but that may prove difficult with fewer than 350 new units projected to open starting October 1, when the firm’s new fiscal year begins.
Losing Its Team, Too?
As if to add salt to the coffee burn wound, the city of Seattle learned the day after the Starbucks announcement that its NBA basketball team, the SuperSonics, will apparently be moving to Oklahoma City beginning next season. Team owner Clay Bennett agreed to pay as much as $75 million to the city of Seattle in exchange for the immediate temination of the team’s lease with Seattle’s Key Arena. Speaking to an Oklahoma city audience, Bennett declared, “The NBA will be in Oklahoma City next season.”