Starbucks To Close 150 Locations, Pull Back On Franchise Expansion Strategy
The coffee titan announced that it will be closing 150 locations in fiscal year 2019, after years of averaging about 50 closures annually, the Wall Street Journal reports. Starbucks CEO Kevin Johnson acknowledged that the strategy of rapid franchising, with locations within supermarkets, airports and the like, had overextended the company and reduced profitability.
Starbucks has reportedly opened 3,000 new locations in the past three years, passing McDonald's in terms of store count in the U.S. But sales have slowed in that same time, with the company reporting flat traffic in this year's second quarter and predicting 1% growth in Q3.
Since taking over for founder Howard Schultz, Johnson has stated his plan to be more analytically driven, with the bulk of the announced closures to come in urban areas where Starbucks is highly concentrated to the point of oversaturation. More growth, Johnson told WSJ, is to be expected in the Midwest and South. The company's franchising efforts will be slowed as well.
Though Starbucks' stock price has dipped in the wake of the closure announcement, the company plans to return $25B to shareholders through dividends and stock buybacks through the end of the 2020 fiscal year, far above the $15B it initially projected in November.