Starbucks To Close 150 U.S. Stores as Sales Growth Underwhelms

The company closed over 8,000 stores in the United States for the afternoon to conduct racial-bias training for its employees following an incident invo

Starbucks to Close 150 Stores in Big U.S. Cities Due to High Minimum Wage Strict Regulations Kyodo News via Getty Images 19 Jun 2018

Starbucks said its profits will be lower than previously expected this year, and it will close more underperforming stores as part of a multipronged response to what chief executive Kevin Johnson on Tuesday called unacceptably slow growth.

Competition from rivals like McDonald's and Dunkin' Donuts is heating up, said Bernstein analyst Sara Senatore in a research note.

The world's largest coffee chain has faced increasing competition from upscale coffee houses and fast-food chains like McDonald's Corp and Dunkin Donuts in recent years, missing analysts' estimates for same-store sales in the USA -dominated Americas region in five of the last six quarters. Outgoing chairman Howard Schultz said the training cost Starbucks "tens of millions" of dollars.

The company will triple its traditional annual average of closing about 50 stores as part of a streamlining effort including rapidly optimizing its USA store portfolio.

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The company said global comparable store sales were on pace to rise 1% in the current third fiscal quarter, far below the 3% jump Wall Street was expecting.

"Our recent performance does not reflect the potential of our exceptional brand and is not acceptable", CEO Johnson said in the statement.

The chain, which operates more than 8,000 USA stores, said the changes were made to address the weaker-than-expected sales growth, adding that several digital initiatives were expected to add 1% to 2% in comparable sales in fiscal 2019. Schultz had operated Starbucks at a growth rate that has made many people a lot of money, as stock prices have increased in eight of the last 10 years.

The company also said it would look to cut general and administrative expenses with plans to partner with an external consultant to speed up the process.

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