Starbucks (SBUX) is set to eliminate jobs as part of a major restructuring plan aimed at boosting efficiency under CEO Brian Niccol’s leadership. In a letter posted to the company’s website, Niccol outlined the difficult decisions the company is making to streamline operations and enhance productivity. The restructuring effort, which will lead to job eliminations, is expected to impact corporate support roles, with employees being notified by early March.
“I do not take these decisions lightly,” Niccol wrote, acknowledging the uncertainty this would create among employees. “I appreciate that this will create uncertainty and concern between now and then. I wanted to be transparent about our progress and our plans and ensure that you hear about this work directly from me.”
As of September 29, 2024, Starbucks employs approximately 361,000 people globally, with around 211,000 based in the United States. The majority of these employees work in-store, and they will not be affected by the layoffs. The job cuts will primarily target corporate roles, including positions in store development, manufacturing, warehousing, and distribution operations, which collectively account for around 10,000 jobs.
Niccol pointed to several changes made in the U.S. and Canada since he took over in September, including the return of condiment stations and the removal of the upcharge for alternative milk. Additionally, Starbucks set a target to serve customers their handcrafted beverages in four minutes or less and added shifts in over 3,000 stores.
“While we have much more work to do, I’m pleased with the progress we’ve made,” Niccol said in the letter.
This move comes as Starbucks attempts to turn around its performance after several quarters of disappointing results. Niccol, a former Chipotle CEO, is focusing on reigniting sales growth for the coffee giant. According to Deutsche Bank analyst Lauren Silberman, Starbucks’ turnaround strategy is still in its early stages, but improvements in marketing, operations, and innovation are expected to drive increased traffic in the coming months.
Silberman added that a positive shift in U.S. same-store sales (SSS) is the key factor for Starbucks’ stock growth, while developments in China also present potential upside for the company.
Starbucks’ stock has significantly underperformed the S&P 500 over the past year, with the company’s stock up less than 4% compared to the 26.5% gain of the broader market index.
This job reduction announcement marks the third major change Starbucks has announced. The company introduced a new Coffeehouse Code of Conduct, restricting in-store seating to paying customers only. A Starbucks spokesperson, Jaci Anderson, said the policy is aimed at prioritizing customers who wish to sit, enjoy their coffee, or use the restroom during their visit.
In another development, board member Mellody Hobson announced her retirement after 20 years of service, reducing the size of Starbucks’ board to nine members. The company has not yet decided whether to fill her seat.
In light of these changes, Starbucks has suspended its full fiscal year 2025 guidance to allow for a more comprehensive assessment of the business and a solidification of key strategies in the ongoing turnaround, according to CFO Rachel Ruggeri during the company’s latest earnings call.
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