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    Layoffs Coming to Starbucks in Structural Changes

  • 'Significant changes' are underway at the java giant.

    Starbucks
    Starbucks is making changes as it battles lagging traffic.

    Bloomberg is reporting that “significant changes,” are coming to Starbucks’ corporate structure, including layoffs at top levels. In a memo to employees, Starbucks chief executive officer Kevin Johnson said: “We must increase the velocity of innovation that is relevant to our customers, inspires our partners, and is meaningful to our business. To accomplish this, we are going to make some significant changes to how we work as leaders in all areas of the company.”

    Johnson added that the leadership and organizational changes were set to begin this week and would carry into November. A spokeswoman confirmed to Bloomberg that layoffs were coming, and there would be some employee shifts between company departments. She didn’t provide an exact number. They're not expected to hit the C-suite.

    “Starting next week and into mid-November there will be leadership shifts and non-retail partner impacts as we evolve the direction of teams across the organization in size, scope and goals," Johnson said in the memo.

    "There will be some job losses, some role expansions, and redeployments," a company spokeswoman told Reuters.

    The memo came following the company’s quarterly town hall meeting in Seattle last week.

    In July, Starbucks’ global same-store sales increased 1 percent. The results were Starbucks’ lowest comps since the company began sharing financials on its investor site in 2011.

    Here’s a look at how Starbucks’ same-store sales have slowed in recent quarters:

    2018

    • Q3: 1 percent
    • Q2: 2 percent
    • Q1: 2 percent

    2017

    • Q4: 2 percent
    • Q3: 4 percent
    • Q2: 3 percent
    • Q1: 3 percent

    2016

    • Q4: 4 percent
    • Q3: 4 percent
    • Q2: 6 percent
    • Q1: 8 percent

    2015

    • Q4: 8 percent
    • Q3: 7 percent
    • Q2: 7 percent
    • Q1: 5 percent

    2014

    • Q4: 5 percent
    • Q3: 6 percent
    • Q2: 6 percent
    • Q1: 5 percent

    2013

    • Q4: 7 percent
    • Q3: 8 percent
    • Q2: 6 percent
    • Q1: 6 percent

    2012

    • Q4: 6 percent
    • Q3: 6 percent
    • Q2: 7 percent
    • Q1: 9 percent

    2011

    • Q4: 9 percent
    • Q3: 8 percent
    • Q2: 7 percent
    • Q1: 7 percent

    Starbucks has countered some of this traffic sag with menu innovations, like a strawberry Frappuccino in June and chorizo sous vide egg bites joining the permanent lineup. The chain also focused on afternoon business with expanded grab-and-go items and cold brew pushes.

    Starbucks’ growth patterns are shifting, too. The company said in June that it expects to close underperforming company-operated restaurants in its mostly densely penetrated markets to about 150 restaurants in 2019, up from a historical average of up to 50 annually. This will result in a slightly lower growth rate in net new company-operated stores. Johnson, on a conference call with analysts, said the overall number of stores would continue to increase, but it would be more focused. These target growth regions include the Midwest and South, where Starbucks has less density than other areas, such as New York City and Washington, D.C. This mirrors the brand's push about a decade ago to close units following years of aggressive growth that slowed comps growth.

    The chain is also “actively exploring strategic options to license company-operated stores in other appropriate markets.”

    Digitally, as of Q3, Starbucks Rewards loyalty program counted 15.1 million active members—a 14 percent increase from a year ago—and 13 percent of all transactions were made via Mobile Order and Pay. The brand engaged 6 million new digitally registered customers who are not yet Rewards members, suggesting no shortage of white space in digital and loyalty.

    On the leadership side, CFO Scott Maw announced in June he would be retiring in November after more than four years in his current role and seven with the company. The news dovetailed with former CEO Howard Schultz’s departure from the board of directors after 40 years with the company. 

    Additionally, Starbucks committed in July to eliminating plastic straws in all store globally by 2020 and announced September 13 that the brand would commit to designing, building, and operating 10,000 of what it calls “Greener Stores” globally by 2025. This will encompass existing stores, new builds, and renovations. The “Starbucks Greener Stores” framework is anticipated to save the company an incremental $50 million in utilities over the next 10 years. This builds on its 10-year legacy of utility cost savings attributable to Greener Store practices, which already equates to about $30 million in saved annual operating costs.

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