(Photo: Starbucks)

Starbucks is focusing more on drive-thrus rather than cafes

The coronavirus (COVID-19) pandemic has caused many businesses to decline in sales and in Starbucks’ case, it’s cost them a $3.2 billion hit in sales with a 43 percent decline in May. Starbucks is looking into cutting back on their cafe experience, focusing more on delivery and pick-up orders.

With this new change in the business model, Starbucks is looking to close over 400 locations in the US and Canada. Starbucks is expecting an adjusted loss of 55-70 cents per share by the next release earnings and operating income will need to decline by $2.2 billion to recoup losses.

Today, Starbucks announces a transformation of our stores. Building on the strength of digital customer relationships, we’ll expand convenience options due to COVID-19 and our evolving customer needs. https://t.co/WGvMTrZQp1

— Starbucks News (@StarbucksNews) June 10, 2020

Starbucks reports that sales are building weekly as more people have the opportunity to visit their locations but people are still reluctant to leave the house. Starbucks is currently operating with 95% of the company’s U.S. stores open for business but the bigger locations in New York remain closed.

China is another key market for Starbucks and is operating with 99 percent of stores open but has reported a 21 percent loss in profit for May. This decline in business is having Starbucks reconsider their core concept of being a “third place” away from work and home for customers to relax.

Starbucks will be gradually closing 400 US locations over the next 18 months in which they will also be opening new modified locations at the same time. This new plan will hopefully replace the closing location, eliminating the possible decline in business.

Starbucks will be spending two years to restructure its business in Canada with the potential of closing 200 additional locations with some possibly changing locations. One of the biggest concerns with this business strategy is whether it will impact breakfast sales.

China is dependent on breakfast sales and they have fewer drive-thru locations than competing companies. Starbucks is making changes in North America and might have to consider making changes to its locations in China.