Half of Starbucks’ U.S. locations are closed

The company said same-store sales fell as much as 70% in the last week of March as the coronavirus shutdown took hold.
Photograph by Jonathan Maze

Starbucks Corp. said Wednesday that its domestic same-store sales declined as much as 70% in the last week of March as thousands of its locations across the country were closed because of the coronavirus pandemic.

The Seattle-based coffee giant said 44% of its 8,800 company-operated locations were open, suggesting more than 4,900 of its locations were not operating, according to a letter to shareholders from CEO Kevin Johnson and CFO Patrick Grismer.

In addition, 55% of its more than 6,000 licensed locations were open, most of them in grocery stores.

Combined, the closures mean that slightly more than half of its 15,000 U.S. locations are not operating at the moment.

Starbucks has closed off its seating areas entirely, opting to keep open only locations with drive-thrus. But 58% of Starbucks’ 8,800 locations have drive-thrus, and 76% of those locations are open.

The closures are a big reason for the steep decline in same-store sales.

Starbucks, much like McDonald’s and some other chains, was off to a strong start to the year. Through March 11, the company’s same-store sales were up 8%, including 4% transaction growth.

The quarter was on pace to be the chain’s best in four years. The results “demonstrate the overall strength of the Starbucks brand and the continued effectiveness of our key growth and margin-improvement strategies,” Johnson and Grismer said.

Starbucks said same-store sales began to decline on March 12 and “steadily worsened as we temporarily closed more stores and traffic in response to the rise in ‘shelter-in-place’ mandates and ‘social distancing’ requirements across the country,” the executives said.

For the full earnings period, Starbucks’ fiscal second quarter, same-store sales declined 3%.

Starbucks did see some recovery in China, where same-store sales plunged 78% in February amid that country’s significant steps to curtail the coronavirus. Same-store sales improved to a 64% decline in March, and the company said they were down 42% in the last week of the month. More than 95% of the chain’s stores are operating there.

For comparison, in mid-February, Starbucks’ same-store sales in China were down 90%.

The company said the shutdown in China cost it $400 million in revenue there, though that was at the lower end of its projected range.

Starbucks did start opening stores again, however, with two new locations opened late in the month.

Johnson and Grismer said the company is using its experience in China to help its U.S. response. They said the company began taking steps in late February, shifted to a takeout-only model in March and then shutting dining areas altogether March 21.

Starbucks is paying workers “service pay” of an extra $3 an hour for shifts worked through May 3.

The company said the business disruption in China cost it 15 to 18 cents’ worth of earnings per share.

Starbucks said the coronavirus’s impact on its profits is expected to be worse in the current quarter, however, though it is unable to estimate that impact “with reasonable accuracy.”

The company had $2.5 billion in cash on hand at the end of the quarter and borrowed $3.5 billion to provide it with liquidity to get through the shutdown. Starbucks has also suspended its share repurchase program and deferred capital spending.

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