Starbucks announces $450 million in changes to its North American operations

Starbucks will invest $450 million in existing stores in North America over the next fiscal year, open 2,000 stores in the region by 2025 and expand employee benefits, the company said on Tuesday. According to interim CEO Howard Schultz, these measures should position the company for a turnaround by 2024.

Schultz, speaking at an investor briefing, said that operations spending and worker benefits will boost sales and profit, and that shareholders will benefit from dividends and the possible resumption of share buybacks. “We are reinventing the company, but we are not reinventing what we do”, said the executive. “We’re just reinventing the way we do it.”

Starbucks executives said the $450 million includes investments in equipment such as faster coffee makers and ovens. Some of the 2,000 new stores the company plans to open in North America by 2025 will only have onsite pickup, delivery and drive-through. Starbucks hopes the new stores and new equipment will speed up service and make it easier for employees to work.

Schultz returned in April as the company’s interim CEO, vowing to tackle recent mistakes he said have hurt the company’s business. Laxman Narasimhan was hired earlier this month to succeed Schultz as CEO.

Investors have been waiting for months for the financial details of the company’s strategic plan. Schultz canceled billions of dollars in share buybacks shortly after returning to the company, saying the money would be better spent on store operations and workers.

Starbucks suspended its fiscal guidance in May, telling investors that executives needed time to assess how much the investments would cost. According to some analysts, the investments are likely to weigh on Starbucks’ profit margins this year, but spending on improving operations is likely to help sales and profits in the long run.

The company also discussed ways to make work more attractive, including more sick leave, more training and technology that allows customers to use credit cards to tip employees.

The National Labor Relations Board said on Tuesday it had certified unions in 224 of Starbucks’ roughly 9,000 US flagship stores, and that 42 stores voted against unionization.

Starbucks previously said it would spend $1 billion on additional labor investments this year, including salary increases. The company said Tuesday that store staff numbers are returning to pre-pandemic levels and that operating hours have returned to normal at locations that had limited service because of staff shortages.