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Starbucks Corporation (NASDAQ:SBUX) announced Thursday that its board of directors has approved a restructuring plan involving the closure of certain coffeehouses and changes to its support organization. The move is part of the company’s “Back to Starbucks” strategy, which aims to revitalize its store portfolio and enhance the customer experience.
According to a statement released through a Securities and Exchange Commission filing, Starbucks will close stores that do not meet criteria for the physical environment or financial performance consistent with its brand. The company expects the majority of these closures to be completed by the end of its current fiscal year. With a current ratio of 0.76, indicating short-term obligations exceed liquid assets, this restructuring appears timely. InvestingPro analysis reveals 10+ additional key metrics and insights about Starbucks’ financial health, available in the comprehensive Pro Research Report.
Starbucks estimates it will incur approximately $1 billion in costs related to store closures, support organization restructuring, and other associated activities. Of this amount, about 90% of the expenses are expected to be attributable to the North America business. A significant portion of these charges will be recognized in fiscal year 2025. The company operates with a moderate debt level, currently standing at $27.9 billion in total debt.
The company provided a breakdown of the anticipated restructuring charges, including approximately $150 million for employee separation benefits, $400 million for the disposal and impairment of company-operated store assets, and $450 million mainly related to accelerated amortization of right-of-use lease assets and other lease costs stemming from early store closures. Of the total charges, about $400 million are expected to be non-cash charges related to asset impairment and disposal, while the remaining $600 million will be future cash expenditures for employee separation benefits and lease exit costs.
The restructuring is part of Starbucks’ effort to prioritize investment closer to its coffeehouses and customers. The company stated that it is further transforming its support organization as part of this initiative.
This information is based on a press release statement included in Starbucks’ recent SEC filing.
In other recent news, Starbucks has been actively seeking bids for a controlling stake in its China operations. Global investment firms Carlyle Group and EQT, along with regional players such as HongShan Capital Group and Boyu Capital, are preparing final offers. The business has been valued at up to $5 billion by bidders, with most offers reflecting approximately ten times the expected EBITDA for 2025. Starbucks has requested non-binding bids from a shortlist of potential bidders, including Bain, KKR, Hillhouse Investment, Primavera Capital, and Tencent, within a two-week timeframe.
Additionally, Starbucks announced a 2% salary increase for all salaried employees in North America as part of CEO Brian Niccol’s cost-control strategy. This raise will impact corporate staff, manufacturing and distribution workers, and store managers. Furthermore, Baird has upgraded Starbucks’ stock rating from Neutral to Outperform, citing confidence in the company’s turnaround strategies. Baird has also increased its price target for Starbucks to $115.00, reflecting optimism about the company’s future under new leadership.
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