Starbucks to close as many as 200 stores in Canada even after COVID-19

Coffee chain Starbucks says it plans to close as many as 200 stores in Canada in the next two years, even after the economy gets back to normal after COVID-19.

The Seattle-based company made the revelation in a filing to U.S. securities regulators on Wednesday. While the coffee business like many others has effectively been on pause during the COVID-19 pandemic, Starbucks says it is starting to look ahead to what its business will be like over the longer term.

The company still says it plans to open more stores around the world, but it will have a smaller footprint in many markets in the U.S. and Canada.

The company said it expects to add about 300 new stores in the Americas this year, down from the 600 previously expected. But while some stores will open, some old ones will close. 

"This repositioning will include the closure of up to 400 company-operated stores over the next 18 months," Starbucks said.

Under normal circumstances, Starbucks typically closes about 100 stores a year, as leases expire and underperforming locations are shut down. But this goes beyond that, in Canada alone.

1,400 Canadian locations

"We will restructure our company-operated business in Canada over the next two years, with the potential of up to 200 additional stores being closed."

Currently, the company has about 1,400 locations in Canada, which means that about 15 per cent of the chain's Canadian stores could close down in the next two years.

But not all the stores will necessarily close completely. Some could simply focus on pick-up orders only, an idea that the chain has been testing out. In February, Starbucks opened a store with that format in Commerce Court, in the heart of Toronto's financial district.

The so-called Starbucks Pickup locations target customers who have ordered in advance on the company's app and then pick it up, or ask to have it delivered. 

"Starbucks Pickup stores will provide more points of presence to better serve on-the-go customers while reducing crowding in our café," the company said.

Prior to COVID-19, Starbucks says about 80 per cent of its sales were to people who came into the store, picked up their purchase and left. It expects that ratio to increase over time.

Emphasis on pickup orders

"While we had originally planned to execute this strategy over a three- to five-year timeframe, rapidly evolving customer preferences hasten the need for this concept and we are now envisioning the accelerated development of Starbucks Pickup stores."

Marion Chan with retail consultancy Trendspotter says the move toward fewer locations and a greater emphasis on pickup orders was likely in the works before COVID-19 sped up the timeline.

"Starbucks sees moving to pickup counters/kiosks as a way to cut down on the cost of real estate, likely the single biggest cost, particularly in major cities like Toronto where rents are so high," Chan told CBC News. 

"They probably did the cost-benefit analysis where they increase the access with kiosks and taking away the lingering of people working in their stores, thereby building transactions among the same individuals."

Like many retailers, Starbucks shut down most of its stores during the pandemic, but the chain has mostly reopened. Today, approximately 96 per cent of the Starbucks locations around the world have reopened in some capacity, including 88 per cent in Canada.

Starbucks says it will take a hit of about $3.2 billion US to its sales because of the virus.