Starbucks Corp (SBUX) is approaching a pivotal technical test when markets reopen Monday, following the company's disclosure of a $400 million restructuring charge tied to its "Back to Starbucks" turnaround initiative. The coffee chain announced it will eliminate approximately 300 U.S. corporate positions and close several regional support offices, a move that does not affect its cafe workers.
Shares closed Friday at $106.82, up 0.4% for the session and roughly 1.8% higher for the week. The stock remains just below its 52-week peak of $108.88, reached on May 14, even as the broader Nasdaq Composite slipped 1.5% amid rising oil prices and bond yields. The real test for the stock will come Monday as traders assess whether the cost-cutting measures signal prudent discipline or underlying strain.
CEO Brian Niccol, who took the helm in late 2023, has been driving the "Back to Starbucks" plan, which focuses on reinvesting in store experiences, employee compensation, and customer service. The company's board on May 13 authorized further steps under this plan, including the restructuring charges. According to a regulatory filing, approximately $280 million of the $400 million in charges will be non-cash, primarily related to accounting write-downs, while the remaining $120 million will be cash expenses, largely for employee separation benefits.
Despite the cost-cutting, Starbucks' sales story remains intact. For the fiscal second quarter, global comparable store sales rose 6.2%, with U.S. comps up 7.1%. Net revenue climbed 9% to $9.5 billion. Niccol described the results as "the turn in our turnaround," while CFO Cathy Smith highlighted improving margins from cost discipline. The company is targeting $2 billion in gross cost reductions over the medium term.
The job cuts will affect support functions such as marketing, human resources, and supply chain. Starbucks is also closing offices in Atlanta, Dallas, Chicago, and other cities, while planning a new corporate hub in Nashville that could bring up to 2,000 jobs over five years. The restructuring is expected to streamline operations and fund growth initiatives.
Analyst sentiment has turned more bullish. TD Cowen's Andrew Charles upgraded the stock to Buy with a $120 price target, citing early-stage turnaround momentum, margin recovery from falling coffee prices, and sales growth outpacing expenses. Charles noted that the company's cost-cutting program and improving fundamentals provide a favorable risk-reward profile.
Internationally, Starbucks faces stiff competition in China, its largest overseas market. The company recently completed a deal with Boyu Capital, giving Boyu a 60% stake in Starbucks' China outlets while Starbucks retains 40% and licenses its brand. The partnership aims to counter cheaper local rivals Luckin Coffee and Cotti Coffee. Starbucks China CEO Molly Liu said the agreement will enable "hyper-localization" of the brand.
Labor tensions remain a risk. United Nations human-rights experts have called on Starbucks and the U.S. government to address allegations of union-busting. Starbucks maintains it is negotiating fairly and notes that unionized baristas represent only about 4% of its U.S. stores. Any escalation in labor disputes could weigh on service quality and brand reputation.
Traders will watch for updates on Starbucks' international support review, any changes in analyst earnings estimates following the restructuring charge, and broader market stability after Friday's decline. If the Nasdaq stabilizes, SBUX could challenge the $108.88 resistance level. A decisive breakout above that mark may attract buyers, while a drop below $105 could signal that Friday's bounce was merely a pause.
