Starbucks Corporation today unveiled a massive $1 billion restructuring plan under which underperforming locations will be closed in a strong effort to boost its competitiveness, along with knowledge-based layoffs across its operations. Approved by the board, the proposal is part of the company’s ‘Back to Starbucks’ campaign’s revitalization strategy.
Sources knowledgeable of the situation claim that up to 900 workers will be let go as Starbucks seeks to close places that don’t fit its operational benchmarks or provide a practical way to profitability. Most of these closures and cutbacks are anticipated to be completed within the present fiscal year.
Starbucks disclosed in a formal filing with the U.S. Securities and Exchange Commission (SEC) that it would close locations when the physical environment or financial viability falls behind the requirements it sets.
On this front, North American activities will account for around 90% of the associated costs, approximately $600 million in cash outflows and $400 million in non-cash items. Severance payments, lease exit fees, and impairment of store assets are among these expenses. Although the reorganization aims to cut weaker connections, Starbucks is also boosting salaried employees’ morale by announcing a 2% pay raise. for its North American salaried staff, a gesture seen by certain viewers as a demonstration of faith in its turnaround plan.
The announcement’s timing highlights Starbucks’s present financial state. At an average ratio of about 0.76, which implies that short-term obligations exceed available liquid assets, experts believe financial needs may have driven the move. need to strengthen long-term resilience and pressures. Starbucks is also looking into a partial divestment in its China activities around the same time U.S.-China tariff extension soars.
The corporation has asked nonbinding bids from institutional investors, including Bain, KKR, and Tencent. Others for a commanding interest. Based on expected 2025 EBITDA multipliers, valuations under debate range from $5 billion. The road ahead looks both ambitious and unclear as Starbucks starts this reform.
