Starbucks, the world's largest coffee chain, is pushing hard on cost cuts, including the sale of overseas units, as it pursues its "Back to Starbucks" strategy of returning to basics after a prolonged slump. The company is reviewing a sale of its stake in its Japan unit, one of its biggest markets, shifting the center of gravity in its Asian business from company-operated stores toward licensing, while also moving to close about 250 underperforming coffee shops in North America.
Starbucks filed documents with regulators outlining plans to close 250 underperforming stores in North America, Reuters reported on the 24th local time. The closures would affect about 1% of the roughly 18,000 stores the company operates in the region.
Cost cutting is not limited to store closures. Reuters reported on the 16th of this month that Starbucks is considering selling a majority stake in its Japan unit, in a deal valued at about $3 billion (roughly 4 trillion won). The move follows the company's full sale of its 50% stake in its Korean unit in 2021 and the completion in April this year of the sale of a 60% stake in its China unit to Hong Kong-based private equity firm Boyu Capital, which converted the business into a joint venture.
Behind the successive restructuring of its Asian operations is a sharp deterioration in North American sales. Starbucks has long held to the principle of providing a "third place," a refuge that is neither home nor office. But after six straight quarters of declining sales, Brian Niccol, who became chief executive in 2024, launched the "Back to Starbucks" strategy in a bid to revive revenue. The cost of that push is being funded in part by selling overseas businesses in Asia and elsewhere. According to the Financial Times, Starbucks plans to invest about $1 billion (roughly 1.3 trillion won) to remodel as many as 9,000 company-operated stores in North America. Because of that heavy spending, revenue rose for a fourth consecutive quarter as of the third quarter of this year, but the operating margin fell to 12.9% from 15.8% over two years.
Against that backdrop, the review of a Japan unit sale is seen as an effort to secure additional funds. The Ginza store in Tokyo, the company's first location in Japan, marked Starbucks' first move outside North America in 1996, and Japan has since consistently ranked as one of the strongest performers among the company's overseas operations. In third-quarter results covering April through June, Starbucks said international store revenue rose 5.7% from a year earlier, led by earnings growth in Japan and the United Kingdom.
