Starbucks Corp. (SBUX) plans to close 150 company-owned stores next year and put the brakes on the number of new licensed stores it opens.
The iconic coffee chain, which typically shuts down about 50 stores per year, said in a statement that the closures will occur mostly in "densely penetrated markets." Management also plans to reduce the number of new licensed stores in 2019 by about 100 stores, according to CNBC.
The company made the announcement after lowering its guidance for comparable same-store sales growth in the current quarter to just 1%, well below the 2.9% expected by analysts. Investors reacted to news that Starbucks could experience its worst performance in about nine years by sending the shares down 3.8% in pre-market trading.
"Our recent performance does not reflect the potential of our exceptional brand and is not acceptable," CEO Johnson said in the statement. "We must move faster to address the more rapidly changing preferences and needs of our customers."
Starbucks said its third quarter forecasts had been impacted by its decision to close 8,000 stores on the afternoon of May 29 to provide roughly 175,000 employees with anti-bias training. The mandatory training program, which outgoing chair Howard Schultz said had cost the company tens of millions of dollars, was enforced after two black men were arrested at a store in Philadelphia while waiting for a friend.
During a presentation at the Oppenheimer Consumer Conference on Tuesday afternoon, reported on by CNN Money, Starbucks CFO Scott Maw admitted that the closures "had an impact.” CEO Johnson added that it “is not an excuse," for the disappointing 1% growth rate. (See also: Big Warning Signs for Starbucks Stock.)
Starbucks hopes to revitalize growth by bolstering its digital initiatives, teaming up with Nestlé S.A. (NSRGY) and developing more healthy drinks. Sales of sugary Frappuccinos, once a major sales driver, fell 3% and now account for just 11% revenue — down from 14% in 2015, noted CNBC. (See also: Nestlé Paying $7.15B to Sell Starbucks Products Globally.)
The company has also decided to increase its regular quarterly dividend by 20 percent. It now expects to return approximately $25 billion in cash to shareholders in the form of share buybacks and dividends through fiscal year 2020, a $10 billion increase from the cash return target announced in November.