Industry News | January 30, 2009

Starbucks Announces Lay Offs, Store Closings

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Starbucks stole headlines this week from the usual suspects on Wall Street with its announcement that the company was planning to lay off 6,700 employees in the coming months.

In an open company letter Wednesday, the chain’s CEO, Howard Schultz, described the move as a “difficult” part of the company’s overall restructuring plan.

“We must act with decisiveness in order to make Starbucks even more relevant in an increasingly worsening business environment,” he wrote.

The cuts are made up of 700 nonstore employees, both domestically and internationally, with about half coming from the Starbucks Support Center in Seattle by mid-February. The remaining 6,000 positions will be in-store employees who will be laid off over the next eight months.

In light of the layoffs, it’s not surprising the company is also planning to close about 300 more units in Fiscal 2009. Two hundred will come from the U.S. and the remainder from international markets.

And since bad news comes in three’s, the company also reduced the number of new company-operated store openings set for 2009 from 200 to 140. Internationally, the company will open 100 fewer stores this year than first anticipated.

The layoffs, store closings, and scaled-back expansion plans are all part of an ongoing cost-reduction effort by the company. Combined with the $400 million cost cuts announced in early December, the initiatives should save Starbucks about $500 million in Fiscal 2009.

Not only is the company looking to save itself money, it’s also exploring ways to help out consumers feeling the economic pinch.

“Beginning in March, we’ll combine our breakfast strengths with a value proposition that challenges the misperceptions of our everyday affordability,” Schultz said Wednesday during an earnings call. “Using uniform national pricing, we’ll offer several breakfast pairings in company-operated stores at attractive price points.”

The company will announce which under-performing stores are affected by the scheduled closings once the list is finalized and employees are notified. Starbucks employs about 167,000 retail employees.

--Blair Chancey

News and information presented in this release has not been corroborated by QSR, Food News Media, or Journalistic, Inc.