Coffee chain Starbucks says it plans to close up to 200 stores in Canada in the next two years, even after the economy gets back to normal after COVID-19.
The Seattle-based company made the revelation in a filing to U.S. securities regulators on Wednesday. While the coffee business like many others has effectively been on pause during the COVID-19 pandemic, Starbucks says it is starting to look ahead to what its business will look like over the longer term.
The company still says it plans to open more stores around the world, but it will have a smaller footprint in many markets in the U.S. and Canada.
The company says it expects to add about 300 new stores in the Americas this year, down from the 600 previously expected. But while some stores will open, some old ones will close.
“This repositioning will include the closure of up to 400 company-operated stores over the next 18 months,” Starbucks said.
Under normal circumstances, Starbucks typically closes about 100 stores a year, as leases expire, and underperforming locations are shut down. But this goes beyond that, in Canada alone.
“We will restructure our company-operated business in Canada over the next two years, with the potential of up to 200 additional stores being closed.”
Not all the stores will necessarily close completely. Some of those stores could simply focus on pick-up orders only, an idea that the chain has been testing out. In February, Starbucks opened up a store with that format in Commerce Court, in the heart of Toronto’s financial district. The so-called Starbucks Pickup locations target to customers who have ordered in advance on the company’s app and then pick it up, or ask to have it delivered.
“Starbucks Pickup stores will provide more points of presence to better serve on-the-go customers while reducing crowding in our café,” the company said.
Prior to COVID-19, Starbucks says about 80 per cent of its sales were to people who came into the store, picked up their purchase and left. It expects that ratio to increase over time.
“While we had originally planned to execute this strategy over a three- to five-year timeframe, rapidly evolving customer preferences hasten the need for this concept and we are now envisioning the accelerated development of Starbucks Pickup stores.”
Like many retailers, Starbucks shut down most of its stores during the pandemic, but the chain has mostly reopened. Today, approximately 96 per cent of the Starbucks locations around the world have reopened in some capacity, including 88 per cent in Canada.
Starbucks says it will take a hit of about $2.2 billion US to its earnings because of the virus.