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.
“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.”
The company said it was re-evaluating how it sells coffee prior to the Covid-19 pandemic due to customers in major cities already showing a greater tendency to order coffee on the go.
In an email to CNN Business, the company said about 80% of transactions at nearly 15,000 US stores are “on-the-go” purchases.
“We were already thinking about what does that future state look like in those metro areas?” a Starbucks spokesperson said. “Covid-19 has actually allowed us to accelerate the plans we already had on the books.”
Starbucks said its new pickup stores will better serve “on-the-go” customers while limiting crowd sizes in its cafes.
“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 also said Wednesday it estimates it earned $3.2 billion less in revenue in its third quarter year over year.
In an investor 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. Same-store 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.