Property Types Retail
Starbucks to Close 600 U.S. Stores
July 2, 2008
By: Thomas Peretti, Contributing Correspondent

As part of its transformation strategy, Starbucks Corp. has revealed plans to close 600 stores in the United States.

Starbucks, which previously announced plans to close 100 U.S. stores, announced the closings after an internal review identified potential stores for closure. The stores were chosen based on poor location that impacted a store’s profitability and poor revenue projections. All impacted stores are scheduled to close by the first half of fiscal 2009.

With the closings of the stores, the company will be eliminating part-time and full-time jobs at the retail level. The timeline for the closings of the individual stores is based on third-party agreements. The pre-tax charges facing Starbucks associated with the closings are estimated to be in the range of $328 to $348 million. Upon the completion of the actions, cash charges are expected to result in a net cash outflow of approximately $100 million, net of related income tax benefits.

Howard Schulz, chairman & CEO of Starbucks Corp., indicated in a release that the purpose for closing the stores was to increase the company’s efficiency and customer service. “We recognize that it is necessary to make decisions that will strengthen the U.S. store portfolio and enable us to enter into fiscal 2009 focused on enhancing operating efficiency, improving customer satisfaction and ensuring long-term value for our partners, customers and shareholders,” Schulz stated.

As of November 2007, Starbucks had 6,793 company-operated stores in the United States. The company is currently undergoing a transformation process that included the return of its founder Schulz to the CEO office after eight years out of the position.

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