Starbucks, home of the R90 foam in a paper cup with your name spelt wrong, announced it’s closing coffeehouses and cutting jobs. And it’s spending about a billion dollars to do it. Welcome to the Starbucks One Billion Brew.
By The Money Maze | Listen to the episode: Spotify
This week we went offshore for a story that had us spitting out our Ricoffy.
How does a company with sales trouble decide the fix is spending a billion dollars to shut things down? It’s like telling your wife you’re broke, then pulling into the driveway in a new Hilux.
Turns out there’s logic in there. Let’s find it.
What Starbucks announced
On 23 September 2025, Starbucks’ board approved a restructuring plan as part of CEO Brian Niccol’s “Back to Starbucks” strategy. Two parts.
First, close coffeehouses in North America where Starbucks either can’t create the space customers expect, or doesn’t see a path to making money. Because it had opened plenty of new stores during the year, its company-operated count in North America would only fall by about 1% in the 2025 financial year. It expected to end the year with nearly 18,300 Starbucks locations across the US and Canada.
Second, cut about 900 non-retail roles and close many open positions. So it’s the office people, not the baristas. The oke in head office who invented another syrup flavour is sweating. Your latte artist is probably fine, for now.
Niccol said Starbucks would grow its number of coffeehouses again in 2026 and upgrade more than 1,000 locations over the next 12 months.
Where the $1 billion goes
Here’s the bit most headlines skipped. Starbucks’ SEC filing breaks the roughly $1 billion down:
- about $150 million for employee severance,
- about $400 million for writing off and disposing of store assets,
- about $450 million mainly for leases on stores closed before the lease ends.
About 90% of it relates to North America. And here’s the key split: about $400 million is non-cash, the asset writedowns, and about $600 million is real cash going out for severance and lease exits.
Restructuring charges in plain English
A restructuring charge is the cost of reorganising: closing sites, paying people to leave, breaking leases. Companies usually report it separately so investors can see the “normal” business underneath.
The $400 million writedown is an impairment. The money was spent years ago on fit-outs and equipment. The writedown just admits those assets aren’t worth what the books said. Paper pain, no cash leaving today.
The $600 million is different. That’s money actually leaving the bank. Breaking a lease early is like cancelling your gym contract: you still pay, you just stop pretending you’ll go.
Why spend money to save money?
Picture ten chops on the braai. Six are sizzling lekker. Four are blacker than a stage 8 night. You can keep flipping the burnt ones and hoping for a miracle, or you can bin them and focus the fire on the good meat.
That’s the Starbucks logic. Underperforming stores eat management time, staff and capital. Closing them costs money now and should stop the bleeding later.
It’s also a reset. Spending on fancy upgrades in bad locations is like putting solar panels on a shack with no roof. Looks great in the photos, still leaks when it rains. Niccol said early results from upgraded coffeehouses show customers visiting more often and staying longer, and that more staff in busy stores improved sales and service times.
The risk: shrinking without growing
If Starbucks prunes all this and the remaining stores don’t actually earn more, it’s just spent a billion dollars to get smaller. Same problems, fewer shops. Like buying a fancy Weber and realising you forgot the charcoal.
And coffee isn’t immune to tight wallets. When fuel and groceries bite, Ricoffy at home starts tasting like fine dining. The real test is 12 to 18 months later: did the cuts free up cash, was it reinvested well, and are customers still queuing?
The South African parallel
We see the same move on the JSE. Pick n Pay closed loss-making stores to fix its business. Mining houses shut shafts when the ore costs too much to dig up. It’s never pretty: people lose jobs, customers moan, politicians grandstand. But sometimes the fix starts with cutting.
The investor’s job is to look past the headline. Don’t just see “$1 billion charge”. Ask what costs won’t exist next year because of it.
Starbucks bull case
A clear plan from a CEO who has done turnarounds before, at Chipotle. Most of the cost is once-off. Weak stores out, money pushed towards staff and service in the stores that work. Early data on upgraded stores is encouraging.
Starbucks bear case
$600 million of it is real cash. Consumers are under pressure. Competition for cheap caffeine is everywhere, from fast food chains to the petrol station. And restructuring only pays off if sales at the remaining stores actually grow.
Key numbers
- Restructuring cost: about $1bn. So what: around $600m cash, $400m non-cash writedowns.
- Non-retail roles cut: about 900. So what: head office takes the knock, not the baristas.
- North American company-operated stores: down about 1% in FY25. So what: closures offset by openings.
- Upgrades planned: more than 1,000 locations in 12 months. So what: the money is being redirected, not just saved.
Takeaway: You can’t polish rotten boerie. Bad assets stay bad no matter how much sauce you pour on. But bold action without execution is just expensive theatre.
Want the full braai version? Listen on Spotify. And if you’d like the Maze in your inbox, join the free Maze Mail list.
More from The Money Maze
- Pick n Pay’s R736 Million Loss: Is the Trolley Still Wobbling?
- Coca-Cola’s R45bn CCBA Sale: Is Coke Leaving South Africa?
- HEPS, Core Earnings and Impairments Explained
- Spur’s 40% Dividend Feast
Sources
- Form 8-K: Costs associated with exit or disposal activities, Starbucks Corporation (SEC filing), 25 Sep 2025.
- Letter from Brian Niccol, Exhibit 99.1, Starbucks Corporation, 25 Sep 2025.
- Starbucks to close hundreds of stores, lay off 900 workers as part of turnaround plan, AP News, Sep 2025.
This is not financial advice.