Starbucks plans to close up to 200 Canadian stores

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A man looks out of a window next to a Starbucks at Toronto Pearson International Airport on March 16, 2020. Starbucks Corp. will close up to 200 cafes in Canada over the next two years, the company said.

Nathan Denette / The Canadian Press

Starbucks Corp. will close up to 200 cafes in Canada over the next two years as the COVID-19 pandemic has accelerated plans to deal with changing customer behavior.

The Seattle-based chain said on Wednesday that it was working more aggressively to “transform our store portfolio”, including putting more emphasis on mobile orders, drive-thru and takeout. While some locations will close entirely, others will be “repositioned,” according to the company, either by moving to a new location, or by changing the store format. Starbucks has not disclosed how many people will be repositioned in Canada.

According to the company, even before the crisis, 80% of transactions in its American cafes were “on the move” and customer use of its mobile application was increasing. Starbucks had already started opening pick-up locations only – the first of them in Canada launched in downtown Toronto earlier this year. Starbucks was also already planning to close underperforming locations, such as low-traffic malls, while opening more drive-thru locations.

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“While we originally planned to execute this strategy over a three to five year period, rapidly changing customer preferences are accelerating the need for this concept and we are now considering accelerated plans to transform our store portfolio over the course of for the next two years, “The company said on Wednesday in a statement.

Starbucks has cut its store opening plans in half in North America for this year. The chain now plans to open 300 “new net stores,” compared to about 600 that were originally planned.

The company typically closes approximately 100 stores per year in North America, largely due to expiration of leases.

The transformation plan applies to cafes owned and operated by the company. Starbucks has approximately 1,600 locations across Canada, of which 1,148 are corporate locations and the remainder are licensed.

“While we expect this portfolio optimization to generate net new store growth for the Americas in fiscal 2021, it will have a moderately negative impact on revenues in the Americas in the next fiscal year,” said Starbucks said in a letter to shareholders filed with the US Securities and Exchange. Commission Wednesday.

The changes come at a time of fierce competition in the Canadian coffee industry, with the biggest players – Starbucks, Tim Hortons and McDonald’s – fighting to gain market share.

“Coffee is still a battleground,” says Vince Sgabellone, food service analyst at research firm The NPD Group Inc. “Canadians love their coffee and made breakfast their number one meal.” in Canada. Italy is the only other country we follow where this is the case. ”

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One of the fastest growing market segments, numerical control, including delivery, he added. This trend has only intensified due to the pandemic.

“No one wants to be in a crowd,” said Sgabellone. “Starbucks is quite advanced with their digital engagement… they were ahead of the other market players who, to some extent, are catching up. “

In response to the pandemic, Starbucks closed almost all of its cafes in Canada on March 20, offering only drive-thru and delivery services. The vast majority of locations worldwide, including Canada, have now reopened, with restrictions in place to encourage physical distance.

“With each passing week, we see clear evidence of business recovery, with sequential improvements in the performance of comparable store sales,” the company said in a statement.

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