Starbucks has closed 2,000 stores across China, representing half of its total outlets in the country. The Seattle-based coffee giant became the first major American corporation to alert investors that the coronavirus outbreak would negatively affect its financial performance.
The shuttered locations account for approximately 10 percent of the company’s global revenue. China serves as Starbucks’ largest market outside the United States, with the company having first entered the country through a Beijing store in 1999. The current closures mark a sharp reversal for a business that had recently reported strong first-quarter results and was preparing to raise its financial projections.
Chief Executive Kevin Johnson stated that the company has postponed its 2020 profit forecasts. He characterized the situation as “a very dynamic situation” that the firm is working through.
Management indicated that the full financial impact will not be determined until at least March, as it depends on how many stores remain closed and for what duration. The closures are not absolute across all locations. Some Starbucks outlets that remain open have adjusted their operating hours. The company stated it is collaborating with health authorities.
Johnson said the company is responding “in a thoughtful and responsible way to protect our partners and support health officials and the government as they work to contain this public health risk.” The numbers highlight the severity of the situation: 2,000 stores closed, half of the company’s national footprint, and a profit forecast placed on hold. For a company that had been experiencing strong momentum, the outbreak struck quickly.
The novel coronavirus spread rapidly in the weeks before the January 30 announcement. While Starbucks was not the only business affected, its size and prominence made its warning a significant indicator for the market. When the world’s largest coffee chain closes half its stores in the world’s most populous nation, investors pay attention.
The decision to close those locations involved careful consideration. China has been a growth driver for Starbucks, and the company has made substantial investments there.
Closing 2,000 outlets means lost revenue, unused equipment, and staff sent home. It also disrupts supply chains for coffee beans, milk, cups, and other materials needed to run a large retail operation. The company did not disclose how many employees are affected but said it is taking steps to protect workers.
Johnson’s comment about navigating a dynamic situation reflects the uncertainty surrounding the outbreak’s timeline. In late January, the virus was still spreading, and governments were still responding.
Starbucks, despite its global reach, could only take reactive measures: close stores, adjust hours, delay forecasts. It could not stop the virus. The economic implications extend beyond Starbucks.
The company serves as a proxy for consumer spending in China. If its sales suffer, other retailers are likely to experience similar effects.
The warning came as other businesses worldwide took comparable actions to address the public health risk. Airlines reduced flights, factories slowed production, and events were canceled. For now, the 2,000 closed stores remain empty.
The ones still operating do so on reduced hours. The profit forecast is on hold.
Starbucks, like many others, is waiting to see how long the outbreak lasts and how deep the damage goes. The company said the answer will come by March at the earliest. Until then, half the stores in China stay dark.
