Starbucks to Shut Down 150 Stores in 2019

Starbucks (NASDAQ: SBUX)announced in a press release that the corporation will be increasing the closure of underperforming company-operated stores in its most densely penetrated markets to 150 in fiscal year 2019, a significant increase from its historical average of up to 50 annually. The global coffee chain said this will cause a slightly lower growth rate in net new company-operated stores for fiscal year 2019.

Following this announcement made by CEO Kevin Johnson on Tuesday, Starbucks shares plummeted the next day, dropping nearly 10% when the market closed on Wednesday. This is the lowest the global coffee chain has been at in 52 weeks.

Johnson partly attributed the lackluster performance during the second-quarter to shutting down 8,000 U.S. stores for anti-bias training due to the arrest of two black men in Philadelphia.

 “In this current quarter, certainly we had an unplanned initiative driven out of the Philadelphia incident, we closed all our stores for training, we had to delay some marketing, but none of that is an excuse,” Mr. Johnson told CNBC. “The fact is the way I think about a growth company at scale is we’ve got to deliver consistent growth, month after month, quarter after quarter, and year after year. And we have not done that.”

In a press release, the company stated its plans to accelerate growth in the U.S. and China by streamlining initiatives to “enable greater agility in adapting more quickly to changes in consumer preferences.” They plan to do this by accelerating product innovation of core beverages and leveraging the tea and refreshment category and responding to health and wellness trends demonstrated by consumers.

Morgan Stanley downgraded the company’s investment rating, citing flat growth in China and the decision to lower third-quarter U.S. growth projections from 3 percent to 1 percent.

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