Starbucks Asks to Pay Less Rent on U.S. Stores Despite Recovering Sales

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After reopening most of its U.S. retailer places earlier this month, Starbucks recovered between 60 and 65 % of home gross sales, in contrast with these reported this time final yr, CEO Kevin Johnson stated Thursday.

In a letter addressed to Starbucks’ companions that seems on the company’s web site, Johnson shared optimistic monetary updates with regard to shops within the U.S. and China, the place its institutions have resumed modified operations following closures in response to the coronavirus outbreak.

“Over the past two weeks in the U.S., we are seeing a positive response from customers as they adapt their daily rituals to this ‘now normal,'” Johnson wrote. “We have now regained about 60-65 percent of prior year comparable U.S. store sales while reopening under modified operations and with reduced hours. In China, we have seen progress as well and our comparable store sales have reached about 80 percent of prior year levels.”

About 85 % of Starbucks shops reopened throughout the U.S. in the course of the first week of May, and Chief Financial Officer Patrick Grismer stated the corporate anticipates one other 5 % will comply with in early June. Starbucks started reopening shops in China a number of weeks earlier than.

Acknowledging the financial downturn brought on by the pandemic and the losses to Starbucks mirrored in its most up-to-date earnings report, Johnson stated in Thursday’s letter that shops will likely be decreased to restricted hours till client site visitors will increase additional. According to its annual monetary report, Starbucks’ web earnings totaled practically $3.6 billion in 2019.

Johnson’s gross sales replace got here shortly after Starbucks issued requests for hire reduction to its U.S. landlords, citing monetary considerations because of the pandemic, a number of media retailers have reported. According to The Seattle Times, which printed the information first, Starbucks Chief Operating Officer Roz Brewer requested for “concessions to support modified operations and adjustments to lease terms and base rent structures” in a May 5 letter. Brewer requested that the changes take impact June 1 and final one yr, based on the Times.

Starbucks didn’t reply to Newsweek‘s request for touch upon the letter earlier than publication.

Starbucks Asks to Pay Less Rent on U.S. Stores Despite Recovering Sales
A person wears a masks outdoors a Manhattan Starbucks on May 20. Stores within the espresso chain have resumed modified operations following closures in response to the coronavirus outbreak. Noam Galai/Getty

Reports from a number of retailers have famous that landlords who obtained the letter weren’t eager to adjust to the hire request. Leon Brooks, a landlord in San Clemente, California, instructed the Times he responded to Starbucks along with his personal letter, which learn, “I am highly disappointed, disgusted and angry. Shame on you.”

Grismer mentioned potential modifications to agreements with Starbucks landlords throughout an April 28 convention name to debate the corporate’s most up-to-date earnings report, which coated the primary three months of 2020.

“We are having ongoing conversations with our landlords in various markets regarding what may be commercially reasonable lease concessions in the current environment,” he stated. “We’ve not yet confirmed those arrangements, and it’s really premature to indicate what that relief may look like, but it is something that we are pursuing.”