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Starbucks plans to slow growth and close some U.S. stores, following a year which saw stock plummet 50 percent over the previous year and a decrease in traffic in domestic stores.
The company’s chairman, Howard Schultz, is taking back the job of chief executive, and current CEO Jim Donald has been shown the door, writes the Chicago Tribune.
Some of the capital initially intended for growth in the U.S. will be used to accelerate international expansion.
Challenging times have fallen on the world’s largest chain of coffee houses as competitors such as McDonald’s and Dunkin’ Donuts have added lines of gourmet coffee. McDonald’s has plans to step up that competition: the Wall Street Journal reported yesterday that the fast food chain plans to add coffee bars complete with baristas at its nearly 14,000 locations.
After introducing its gourmet blends and adding lattes and cappuccinos to two-thirds of its stores, McDonald’s increased its U.S. coffee sales by 39 percent in the first nine months of 2007, according to the Toledo Blade.
Part of Starbucks’ problem, according to Schultz, is that the company spent the last several years investing “ahead of the growth curve,” focusing on processes, infrastructure, roasting plants, coffee buying and people, which took away from the experience customers are having in the stores. Now he plans to invest in better training for baristas, among other things.
The company has said that it plans to open 2,500 stores this fiscal year, with 1,600 in the U.S. That number is about 100 fewer U.S. stores than originally planned. While Schultz would not give details about how many stores he plans to close, he said it would be significantly lower than the slowdown in store openings, and that he has no plans to vacate entire markets.
The Starbucks homepage features a letter from Schultz announcing his return to the CEO role, in which he writes, “We have enormous opportunity and exciting plans in place to make the Starbucks Experience as good as it has ever been and even better. In the coming months, you will see this come to life in the way our stores look, in the way our people serve you, in the new beverages and products we will offer. That is my promise to you. Everyone at Starbucks looks forward to sharing these initiatives with you.”
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