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Starbucks to close up to 400 stores in shift to takeout strategy

Jun 10, 2020, 3:17 PM | Updated: 3:18 pm
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Originally Published: 10 JUN 20 16:10 ET

(CNN) — Starbucks is pivoting hundreds of North American stores away from the cafe model it helped make ubiquitous and will expand its pickup-only and to-go business — a strategy shift that illustrates how much consumer behavior has changed during the pandemic.

The company said it plans to close up to 400 stores in the US and Canada over the next 18 months, while at the same time adding carryout and pick-up only locations.

In its latest SEC filing, the company said it ultimately expects to open about 300 new North American stores that specialize in carryout and pickup options over the next year and a half.

“This repositioning will include the closure of up to 400 company-operated stores over the next 18 months in conjunction with the opening, over time, of a greater number of new, repositioned stores in different locations and with innovative store formats,” the company wrote in its filing.

Starbucks said its retail strategy is designed to “enhance the customer experience, expand our retail presence and enable profitable growth for the future.”

In an email to CNN Business, the company said it has recently reexamined its brick-and-mortar retail strategy. Starbucks said about 80% of transactions at nearly 15,000 US stores are “on-the-go” purchases.

“Our vision is that each large city in the US will ultimately have a mix of traditional Starbucks cafés and Starbucks Pickup locations,” the company said in the email.

Starbucks said its new pickup stores will better serve “on-the-go” customers while limiting crowd sizes in its cafes.

News of the store closures emerged just hours after Starbucks said it expects to lose $3.2 billion in its third quarter, which ends on June 28.

In an earnings call Wednesday morning, Starbucks confirmed it has reopened 95% of its US stores after closing them in March to comply with social-distancing mandates.

The company’s same-store sales plummeted 43% in May compared with the same month last year. April’s year-over-year sales decline was even worse.

Starbucks’ sales outlook is improving somewhat. Sales in the last week of May were down 32% when compared with the same week in 2019, marking its “sixth consecutive week of sequential improvement from a weekly low of -65% in mid-April,” the company said.

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Starbucks to close up to 400 stores in shift to takeout strategy