Starbucks $1B Restructuring: Can Niccol Fix Coffee Giant?

The appointment of Brian Niccol as CEO in late 2024 was met with significant optimism on Wall Street. Niccol, hailed for his successful turnaround of Chipotle Mexican Grill (NYSE:CMG) through digital innovation and operational discipline, was seen as the leader who could apply the same revitalizing formula to Starbucks (NASDAQ:SBUX). However, the recently unveiled $1 billion restructuring plan signals that the company’s issues—including a 2% decline in U.S. transactions and six straight quarters of negative same-store sales—are more deeply rooted than many investors anticipated. This is not Starbucks’ first attempt at a comeback, but the scale of this effort suggests a recognition that past strategies have failed to produce lasting success.

The financial picture reveals the core of the struggle. While the company reported a 4% revenue increase to $9.5 billion in its third quarter, net income plummeted by 47% to $558 million. This sharp decline highlights the profit-sapping effects of operational inefficiencies, heavy discounting, and the costs associated with maintaining an expansive global footprint of 39,000 stores. The pressure is mounting from all sides: competitors like Dunkin’, Dutch Bros (NYSE:BROS), and China’s Luckin Coffee are eroding market share, while the company grapples with the difficult task of maintaining a premium brand identity across diverse markets from the United States to Canada.

Dubbed the ‘Back to Starbucks’ plan, Niccol’s strategy is a deliberate shift away from complexity and back to the company’s foundational strengths: quality coffee and a welcoming in-store experience. The centerpiece of this effort is a dramatic simplification of operations. The menu will be reduced by 30% by the end of fiscal 2025, paring back experimental offerings to prioritize core, popular coffee drinks. Simultaneously, the company will close approximately 500 underperforming company-owned stores across the U.S. and Canada, representing about 1% of its footprint. A symbolic closure is the Seattle Roastery, a premium destination opened in 2014 that ultimately proved unprofitable.

The human and financial cost of this reset is substantial. The $1 billion restructuring charge will cover severance for corporate staff layoffs, lease terminations, and asset write-offs. Beyond cuts, the plan includes positive investments: remodeling over 1,000 existing stores, improving service speed, and launching new health-focused items like high-protein cold foams. The company also intends to shift away from heavy discounting to protect its premium pricing and resume net store growth in 2026, supported by technology enhancements for mobile ordering. The goal is to create a more efficient and focused operation, but the immediate financial pain is undeniable.

Despite the ambitious plan, analysts are divided on Starbucks’ prospects for a swift recovery. The sheer scale of the company—with 18,300 stores in the U.S. and Canada alone—makes executing a uniform turnaround incredibly challenging. Operational issues, such as supply chain complexities and union-related tensions at some of the stores slated for closure, add further layers of difficulty. Reversing the momentum of six quarters of negative growth is a monumental task that will require time and flawless execution across its global operations.

For investors, the situation presents a dilemma. Starbucks stock, trading around $84 per share, is down nearly 30% from its 2025 peak of $117. While the company offers a 2.9% dividend yield and has a history of raising its payout, its forward price-to-earnings ratio of 31x indicates the market is still pricing in a recovery, not a value opportunity. Niccol’s track record at Chipotle provides a reason for optimism, suggesting a reasonable chance of stabilizing the business. However, returning Starbucks to its former status as a high-growth stock is a far more uncertain outcome. The company may well emerge as a reliable dividend payer, but recapturing its legendary growth will depend on Niccol’s ability to not only streamline operations but also reignite a genuine connection with customers worldwide.