Shares of Starbucks (NASDAQ:SBUX) hit a new low this week after the company announced that it has plans to close over 150 of its stores in the next year.
Starbucks also announced a lowered outlook for third quarter sales that did not resonate well with Wall Street traders.
The company said that company-owned stores to be closed are in locations that are densely populated areas. Starbucks also said it would be slowing the number of licensed stores that it opens.
The company plans to reduce the number of licensed stores by around 100 stores in 2019.
Considering that usually it’s around 50 stores a year that the company closes, a number like 150 startled investors, sending shares of the stock down as much as 3% in after-hours trading on Tuesday.
CEO Kevin Johnson remarked at the Oppenheimer Annual Consumer Conference in Boston on Tuesday, “We know that we drive more shareholder value in a company-owned store … than a licensed store.”
Johnson said that Starbucks will also continue to explore strategic options to license company-operated stores in other “appropriate markets.”
The company is also expecting to return about $25 billion in cash to shareholders through share buybacks and dividends through 2020 and is also going to increase its quarterly dividend by 20%.
For the third quarter, Starbucks (NASDAQ:SBUX) is expecting same-store sales across the globe to see an increase of just 1%.
“We must move faster to address the more rapidly changing preferences and needs of our customers,” Johnson stated.
“Over the past year we have taken several actions to streamline the company, positioning us to increase our innovation agility as an organization and enhance focus on our core value drivers which serve as the foundation to re-accelerate growth and create long-term shareholder value.”
Johnson had also said, “In this last quarter, we had an unplanned initiative related to the incident in Philadelphia that culminated in closing stores.”
Two Black men had been arrested in April sitting at a Philadelphia Starbucks waiting for a friend.
He did add though that, “It is not an excuse,” for the 1% growth rate.
According to Chief Financial Officer Scott Maw, it was closures that “had an impact.” It was on May 29th that the company closed 8,000 stores in the afternoon to give 175,000 employees mandatory anti-bias training after the Philadelphia incident.
Chairman Howard Schultz, who is leaving the company, said the training cost Starbucks (NASDAQ:SBUX) “tens of millions” of dollars.