Starbucks reins in expansion, ramps up store closings
Starbucks Corp. is slowing down U.S. store expansion and increasing the pace of store closures in the face of slowing same-store sales.
The coffee giant on Tuesday said it expects a 1% increase in global same-store sales in its third (current quarter), below analysts expectations of a 2.9% increase. As part of a streamlining initiative, Starbucks is “optimizing” its U.S. store portfolio at a more rapid pace in fiscal 2019, and will close about 150 company-operated underperforming stores in its most densely populated markets (up from an historical average of 50 annual). New store growth will focus on under-penetrated markets. It also is slowing licensed-store growth.
“We must move faster to address the more rapidly changing preferences and needs of our customers,” said Starbucks president and CEO Kevin Johnson. “Over the past year we have taken several actions to streamline the company, positioning us to increase our innovation agility as an organization and enhance focus on our core value drivers which serve as the foundation to re-accelerate growth and create long-term shareholder value.”
Starbucks said it is actively expanding the breadth and depth of digital relationships with current and new customers. The company has added 5 million new digitally registered customers since April 2018, and 2 million active Starbucks Rewards members year-over-year to 15 million, up 13% from the previous year.
The retailer expects newer digital initiatives to contribute one to two points of comp growth in the U.S. in 2019, supported by a redesigned Starbucks Rewards program that provides customers more choice around redemptions and payment, as well as expanded personalization capabilities for customers that have a digital relationship with the company.
Starbucks said that it expects to return about $25 billion in cash to shareholders in the form of share buybacks and dividends through 2020. This is a $10 billion increase from the forecast the company set last November. The company will hike its quarterly dividend by 20%.
Sugarfina going global
Luxury candy brand Sugarfina is expanding into Asia.
Sugarfina will open its first store outside of North America this summer, in the upscale Harbour City mall Hong Kong. The company will partner with franchise operator Upper East Holdings LTD.
“We’ve been dreaming of expanding Sugarfina globally since the early days of the brand,” said Rosie O’Neill and Josh Resnick, co-founders and co-CEOs of Sugarfina. “Hong Kong is the window into Asia and Upper East Holdings is the ideal partner to establish our brand in the region.”
A recipient of Chain Store Age’s 2016 Breakout Retailers Awards, Sugarfina is known for its luxe packaging and innovative confections, made by artisan candy makers around the globe. More than three quarters of Sugarfina offerings are exclusive and can’t be found at any other candy store.
The 900-sq.-ft. Hong Kong boutique will feature Sugarfina’s crisp aqua and white color scheme and upscale, sophisticated ambience. The brand plans to open additional locations in Hong Kong with Upper East Holdings, and continue expanding internationally through similar partnerships.
“We were mesmerized by Sugarfina’s sophisticated concept and innovative candy flavors,” said Tammy Wu and Stephen Yeung, Directors of Upper East Holdings. “We have always been passionate about finding the perfect luxury confections experience to bring over from the United States and we look forward to working with the creative minds of Sugarfina.”
Sugarfina opened its first location in 2013, in Beverly Hills, Calif. It has more than 50 locations across North America in major cities such as Los Angeles, New York, Boston, Chicago and Vancouver.
Department store company investing in store upgrades
Holt, Renfrew & Co. is investing more than C$400 million to renovate and expand stores across Canada.
The luxury department store retailer is also making significant investments in new technologies to improve and enhance customer interaction and support robust online capabilities.
“These investments will help us to enhance the first-rate, luxury shopping experience our customers expect from Holt Renfrew,” said Mario Grauso, president, Holt Renfrew. “We’re securing our position as a top global destination for luxury fashion and beauty products.”
Here is an update on Holt Renfrew’s brick-and-mortar investments:
• The two-year, 40,000-sq.-ft. update (designed by Janson Goldstein) of Holt Renfrew Vancouver is nearly complete. The store now includes a renovated women’s footwear area that has tripled in size and an expanded beauty hall, personal shopping and men’s department.
• On St. Catherine’s Street in Montreal, the phased enhancements and renovations to Holt Renfrew Ogilvy will expand the store to over 250,000 sq. ft. making it the largest Holt Renfrew in Canada. Designed by Jeffrey Hutchison & Associates, with support from Lemay, a Montreal-based architectural firm, the store is adding an expanded beauty hall, leather goods shop and an enhanced women’s footwear department.
The store will also feature a new façade led by global architecture and design firm Gensler and will also offer customers an enhanced gourmet dining experience with a Colette Grand Café designed by Paris-based Laplace.
• Holt Renfrew’s Toronto flagship will be updated and refreshed with an expanded and newly renovated women’s footwear department, and an expanded beauty department and women’s leather goods area. Once complete, the store will also include an expanded men’s department. Customers will be able to enjoy a gourmet dining experience in a new Colette Grand Café, designed by Alex Cochrane Architects and slated to open late 2019. The flagship renewal is designed by award-winning creative agency Kramer Design Group and master architects Gensler.
• Holt Renfrew Yorkdale will expand by 10,000 sq. ft. to 129,000 sq. ft. The interior has been designed by Kramer Design Group in partnership with master architect Gensler, responsible for the store’s façade, expansion and renovation.
Holt Renfrew is also investing in new technologies that will increase and enhance the ways in which the company interacts with customers. The retailer is updating its entire online presence.