Starbucks Unveils $1 Billion Restructuring Plan to Revitalize North American Operations

Starbucks has announced an ambitious $1 billion restructuring initiative aimed at reinvigorating its North American operations and addressing faltering sales, according to a CNBC report dated October 25. The sweeping plan underscores the company’s commitment to streamlining its business, driving innovation, and reclaiming its standing in the increasingly competitive coffee retail market.

Major Closures and Workforce Reductions on the Horizon

In a filing released on October 26, Starbucks detailed its strategy to shut down hundreds of company-operated stores across North America and lay off approximately 900 non-store employees. These moves form part of the "Back to Starbucks" initiative spearheaded by CEO Brian Niccol, which seeks to overhaul operational efficiency and focus on customer-centric measures.

Analysis by TD Cowen reveals that the restructuring will result in the closure of around 500 stores. This translates to a net 1% decrease in company-operated locations in North America when factoring in new store openings and other planned closures through fiscal year 2025. The store closures aim to consolidate operations and shift resources toward higher-performing locations to better serve consumer demand.

The workforce reduction will see 900 non-store employees laid off, effective October 27. This follows an earlier round of 1,100 corporate job cuts implemented under Niccol’s leadership earlier this year as part of broader cost-containment and efficiency measures.

Breakdown of Restructuring Costs

The $1 billion restructuring budget will be heavily concentrated in the North American market, accounting for 90% of the total expenses. The financial breakdown includes $150 million earmarked for employee severance packages, ensuring compensation for those impacted by layoffs. A significant $850 million will go toward costs associated with closing underperforming stores. Starbucks expects much of these expenditures to impact its fiscal year 2025 financial outcomes.

Tackling Declining Sales and Competitive Pressures

At the heart of the restructuring effort is Starbucks’ mission to reverse its ongoing decline in North America, the company’s largest and most critical market. Over the past six consecutive quarters, the coffee giant has faced weakening same-store sales, exacerbated by increased market competition and more price-sensitive customer behavior. These factors have pressured Starbucks to reassess its operational strategies and place greater focus on its core customer offerings.

In a statement, the company confirmed its intention to reinvest its resources into areas "closer to stores and customers." This includes enhancing customer experience, improving store operations, and fostering stronger community engagement—elements Starbucks views as key to overcoming its current sales challenges.

Reassignment and Support for Affected Employees

As the restructuring rolls out, Starbucks plans to mitigate the impact on store-level employees by reassigning baristas from affected locations to nearby stores whenever possible. Additionally, retirement packages will be offered as an alternative for eligible employees. These efforts reflect the company’s aim to navigate the restructuring process with maximum consideration for its workforce while minimizing service disruptions.

However, the market reception to Starbucks’ announcement has been lukewarm. The company’s shares dipped slightly following the news and are down more than 8% year-to-date, highlighting investor concerns about the effectiveness of the turnaround plan.

Restoring Starbucks as a “Third Place” for Customers

The restructuring initiative emphasizes Starbucks’ broader objective of returning to its roots as a “third place” for customers—a welcoming space between home and work. This vision has long been central to the brand’s identity, but it has faced challenges in recent years due to shifting consumer habits and intensifying competition from both boutique coffee shops and large-scale rivals.

Through the combination of store closures, operational reforms, and reinvestment in customer-facing initiatives, Starbucks aims to not only stabilize its financial performance but also reclaim its distinction as a premier destination for coffee lovers.

As Starbucks pivots toward this next phase, the company is betting big on innovation, customer engagement, and operational efficiency to steer its North American operations back to growth. While the path ahead may be challenging, the $1 billion restructuring plan signals a bold step toward rebuilding its brand legacy in an evolving market landscape.