Starbucks Pulls Back From Dense City Clusters, Closing Hundreds Of Urban Stores

(RTTNews) - Starbucks (SBUX) is reversing course and scaling back its urban footprint in markets such as New York and Los Angeles, after years of aggressively saturating major cities with closely spaced cafés.

The company is closing roughly 400 U.S. stores concentrated in large metropolitan areas as part of a $1 billion restructuring effort under Chief Executive Brian Niccol, who was hired last year to turn the business around. In New York alone, Starbucks has closed 42 locations, approximately 12 percent of its citywide total, and has lost its position as Manhattan's largest coffee chain to Dunkin'. More than 20 stores have reportedly closed in Los Angeles this year, along with significant numbers in Chicago, San Francisco, Minneapolis, Baltimore, and other cities.

Starbucks said it reviewed its more than 18,000 stores across the U.S. and Canada and closed those that were underperforming or no longer met brand standards. While reducing dense clusters, the company plans to open and remodel stores in 2026, including in large metros, with updated designs aimed at restoring its image as a comfortable "third place" between home and work.

The shift reflects how Starbucks' once-dominant urban strategy has backfired. The company now faces intense competition from independent cafés, regional chains, and a flood of smoothie and bubble tea shops that have eroded traffic at older locations. Analysts say closing weaker cafés can redirect demand to nearby stores that are larger and better equipped to serve loyal customers.

Starbucks is also betting on growth outside city centers. With labor and rent costs lower in suburban areas, the chain is expanding drive-through formats and focusing on markets where it still sees room to grow profitably.

Broader structural changes have added pressure. Big cities such as New York, Los Angeles, Chicago, and San Francisco lost population after the pandemic, shrinking their customer bases. The permanent shift to remote work has reduced daily commuter traffic in central business districts, leading Starbucks to close stores in office buildings that once depended on heavy weekday footfall.

Operational challenges have also played a role. The company has ended its open-access policy that allowed anyone to use its restrooms or linger without a purchase, citing safety concerns and the strain placed on stores.

As part of its turnaround, Starbucks plans to renovate about 1,000 U.S. company-owned locations with more seating, power outlets, and lounge-style features to attract customers who want to stay. However, the recovery has been slower than many investors expected, with shares down around 6 percent this year. Analysts note that balancing the needs of mobile order customers with those who want to sit and relax remains one of Starbucks' most challenging operational problems.

SBUX currently trades at $85.64, or 0.66% higher on the NasdaqGS.