The run of bad press has seemingly caught up with coffee giant Starbucks, as the company told investors late Tuesday that the company is preparing to close roughly 150 shops that have underperformed.
Closing stores is not new for businesses, but the 150 figure is nearly three-times the average for the company. The announcement was made on the heels of revealing that Starbucks was expecting same-store sales to grow just 1 percent for the quarter of the fiscal calendar beginning next month — after initially projecting a 2.9 percent growth. Stock for the company dropped as much as 5 percent in after-hours trading.
Starbucks CEO Kevin Johnson released a statement regarding the current status of the company. It read:
"Our recent performance dos not reflect the potential of our exceptional brand and is not acceptable," he said. "We must move faster to address the more rapidly changing preferences and needs of our customers."
The brand also announced a multitude of changes, primarily a re-focus in underserved areas versus adding more stores nearer locations that are already performing well. It also said that it would return about $25 billion in cash to shareholders through buyback programs as well as dividend offerings — which was about a $10 billion increase from the previously announced target.
Johnson indicated that the store closings would be mostly in major metro areas, where wage expectations and other regulations make it hard to operate at a greater profit. He added that the more cafe locations figure to be brought to the South and Midwest.
Earlier this month, Howard Schultz stepped down as president, which fueled reports that he was gearing up for a 2020 presidential run. Schultz had operated Starbucks at a growth rate that has made many people a lot of money, as stock prices have increased in eight of the last 10 years.
The company has been pelted with public relations nightmares in the 2018 calendar year — or even slightly before.
Hysteria over the company's holiday cups "pushing a gay agenda" caused a social media firestorm after a Buzzfeed reporter posted a note that added fuel to the fire.
"While people who follow both Starbucks holiday cup news and LGBT issues celebrated the video, the ordinary Starbucks customer probably didn't realize the cup might have a gay agenda," Wong wrote at the time.0comments
The company entered the news cycle again in February when a lawsuit stemming from blood tainting the drink of a two year-old customer made headlines; later, a #BoycottStarbucks movement promoted the closing of every store for racial sensitivity training after two African American men were arrested in a Philadelphia Starbucks; and the month didn't close out any better as a woman in Atlanta found a hidden camera in the restroom.
The last controversial choice made by the company was a price hike to open June, as most beverages increased between 10 to 20 cents.