Starbucks today announced plans to shutter some 400 U.S. locations over the next 18 months while also opening 300 net new stores during fiscal 2020 instead of the 600 it had originally planned at the beginning of the year.
In addition to the store closures in the U.S., Starbucks will close up to 200 additional stores in Canada over the next two years.
It’s all part of a retooling of the coffee chain, as it reimagines its business for a post-pandemic world.
“With each passing week, we are seeing clear evidence of business recovery, with sequential improvements in comparable store sales performance,” the company said in a statement. “The Starbucks brand is resilient, customer affinity is strong and we believe the most difficult period is now behind us.”
Today, 95% of Starbucks’ U.S. company-operated stores are now open, with the remaining 5% primarily located in the New York metro area.
The company said its comparable sales year over year are improving from month to month during the pandemic, with a decline of 43% in May compared to a decrease of 63% in April. For the final week of May, same store sales were down about 32% year over year.
Despite signs of improvement, the coffee chain estimates its revenue for the third quarter will decline by $3 billion to $3.2 billion, while operating income will fall $2 billion to $2.2 billion.
Expanding Starbucks pickup locations
The coffee chain also said it is now entering a new phase, accelerating the transformation of its business to drive long-term growth by introducing a new format called Starbucks Pickup.
The company’s introduction of the concept was part of a two-year review of its U.S. footprint.
Starbucks Pickup, which is tailored for ordering ahead and delivery as well as picking up, is likely to improve operating efficiency in major metro areas in the U.S. such as New York, Chicago, Seattle and San Francisco.
“We will also renovate select store layouts, including the addition of a separate counter for mobile orders at high volume stores making it easier for customers and delivery couriers to pick up their order,” according to the company.
In suburban areas, locations will increasingly feature what the company calls “convenience-led enhancements,” such as curbside, drive-thru and walk-up windows.
“We believe this transformation of our store portfolio, blending Starbucks Pickup stores with traditional Starbucks stores in dense metropolitan markets, will position Starbucks for long-term growth,” the company said.
The rollout of the new pickup format originally was to take place over a three- to five-year time frame but will now occur over the next 18 months.
“This strategy aligns closely with rapidly evolving customer preferences that have accelerated as a result of Covid-19, including higher levels of mobile ordering, more contactless pick-up experiences and reduced in-store congestion,” the company said.
In February, the company promoted Brady Brewer to CMO. He previously led the company’s digital customer experience and was responsible for product discovery, ordering, payment, pickup and delivery.