Starbucks plans layoffs as it battles a slowdown in coffee sales
Starbucks is battling tougher competition to convince consumers to spend $5 on a latte. Now, the company is planning to cut jobs as it battles a slowdown in sales growth.
The company will cut an unspecified number of jobs as it reorganizes its employee ranks, although the job cuts won't impact baristas, according to a memo from CEO Kevin Johnson that was obtained by CBS MoneyWatch.
"We are going to make some significant changes to how we work as leaders in all areas of the company and how functional groups are structured to support our retail stores," Johnson wrote in the memo, which was sent to Starbucks executives and non-retail employees on Thursday.
"Put directly, starting next week and into mid-November there will be leadership shifts and non-retail partner impacts as we evolve the direction of teams across the organization in size, scope and goals," he noted.
The reorganization is one of Johnson's first major corporate moves since taking the helm from longtime chief executive Howard Schultz last year. Already, Johnson has faced a number of tests, including the racial incident in one of its Philadelphia locations that sparked protests and tarnished its image with some customers.
It should be a prime time for Starbucks, given that coffee drinking among Americans is at a six-year high. Yet the chain is battling resurgent competition from lower-priced competitors such as McDonald's and Dunkin' Donuts. And Starbucks' own rapid growth might pose a problem, given that its 13,900 U.S. locations may be cannibalizing sales from each other.
Among Johnson's top priorities is to "accelerate growth in our targeted, long-term growth markets – U.S. and China," according to the memo.
But Starbucks has a long way to go to match the sales momentum it served up just a few years ago. Same-store sales, or sales at stores open at least a year, rose just 1 percent in its most recent quarter. That's far below the 7 percent growth recorded as recently as 2015.
