Why Starbucks Is Shutting Hundreds of Cafes in the Middle of a Comeback
Starbucks is closing hundreds of cafes while customer traffic is climbing, which raises an uncomfortable question about just how badly the chain misjudged its own expansion.
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Starbucks (NASDAQ:SBUX | SBUX Price Prediction) is closing roughly 250 underperforming cafes across North America, while comparable sales are the strongest they’ve been in years. That is the tension. Companies usually prune stores when demand is falling, yet Starbucks is doing so while transactions are accelerating.
The stock barely reacted, trading at $93.65, down 0.52% for the session. But shares are down 11.45% over the past month even as operating results improved, signaling investors view the closures as portfolio hygiene rather than a warning sign.
A Small Cut in the Footprint
The closures represent a low single-digit share of North America’s 18,371 coffeehouses at the end of the most recently reported quarter. A company in distress retrenches, whereas a company in recovery prunes.
The proportion is what makes the argument, because 250 stores in a base that size is a real estate correction. Baristas at the affected locations are being offered transfers or severance, and that is all the company has said about people.
Reading the Restructuring Charge
The restructuring charge splits between cash items covering lease exits and employee separation, and non-cash asset write-downs. The non-cash portion reflects assets already impaired, not cash leaving the business.
This matters because the headline charge overstates the true cash cost. Starbucks recorded $302.6 million in restructuring and impairment charges in the most recent reported quarter and $892 million in full-year FY2025 restructuring charges during the prior program, so you have a template for how these charges land.
Recovery Behind the Pruning
Global comparable sales rose 7.9%, with transactions up 4.2% and average ticket up 3.5%. Transaction growth signals more customers walking in rather than the same customers paying more.
Non-GAAP operating margin expanded 430 basis points to 14.4%, and non-GAAP EPS of $0.85 beat the $0.6499 consensus. Management raised full-year non-GAAP EPS guidance to $2.55 to $2.65.
Management telegraphed the closures on that call. The finance chief said, “we are gaining deeper visibility into some underperforming coffeehouses, which could result in some closures.” The chief executive said the company had “potentially put the wrong store in the wrong place.” That is a real estate correction, in their own words.
Growth Moves Abroad
The reduced net new store target concentrates remaining openings internationally. North America becomes a margin and density story, and unit growth shifts abroad, where local competition and currency create different risks.
This is the second closure round under the current chief executive, following the 627-store cut announced with the prior fiscal year’s fourth-quarter results. Two rounds in short succession raise a fair question about whether the base was over-expanded more broadly.
Bull and Bear Case for SBUX Stock
The bull case: transaction growth is accelerating, margin expansion is real, guidance was raised, and management closes underperforming stores rather than defending them. Analysts carry a $112.23 price target.
The bear case: repeated restructuring rounds, shrinking North American unit growth, and a trailing P/E near 55x that prices recovery in progress. Shareholders’ equity sits at negative $7.67 billion after years of buybacks.
The deciding variable is whether transaction growth holds once the comparisons get harder. The company guided Q4 U.S. comparable sales growth of 6.5% or greater, and that report is the falsifiable trigger. If transactions stay positive, the pruning thesis wins. If they roll over, the second round of closures looks like the first sign of a bigger problem.
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Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth, cyclical, and dividend equities that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as penny stocks.
