The world's largest coffee chain is facing competition both from upscale coffee houses and lower-priced fast-food chains like McDonald's Corp and Dunkin' Donuts.
"It seems fairly clear that the low-hanging fruit on causing everybody to get addicted to their (Starbucks) fantastic products is kind of in the rear-view mirror", said Tony Scherrer, director of research at Smead Capital Management".
The iconic coffee chain, which typically shuts down about 50 stores per year, said in a statement that the closures will occur mostly in "densely penetrated markets".
On a conference call with analysts, CEO Kevin Johnson said those regions include the Midwest and the South, where Starbucks is far less ubiquitous than it is in Manhattan and Washington, D.C. The news was reminiscent of Starbucks' efforts a decade ago to close stores following years of aggressive expansion that led to softening comparable sales growth. That period has seen big strategic moves in China, a globe-spanning partnership with Nestle, a high-profile racially charged incident and unprecedented corporate response, and executive chairman Howard Schultz's quasi-retirement, effective next week. Schultz had operated Starbucks at a growth rate that has made many people a lot of money, as stock prices have increased in eight of the last 10 years.
Starbucks said it expects same-store sales to grow 1% in its third fiscal quarter of 2017.
In early May, Swiss-based Nestle said it would pay Starbucks $7.15 billion for exclusive rights to sell Starbucks coffees and teas. The overall number of stores will continue to increase, but that growth will be focused.