Starbucks Closes Teavana Stores

Barista prepares a paper cup in a Starbucks coffee shop

Starbucks announced this week it was closing all 379 of its Teavana locations over the coming year.

The Starbucks Coffee Co. says its closing all 379 of its Teavana locations, which includes the one at the Lehigh Valley Mall in Whitehall Township. There were 5,300 store closing announcements in the first six months of the year, triple the number during the same period last year, according to an analysis by Fung Global Retail & Technology. "Our Teavana mall stores have not been immune, with many reporting negative comps and operating losses for some time".

Starbucks bought the tea company for $620 million in 2012, but despite "creative merchandising and new store designs, the underperformance was likely to continue", the company said in a third-quarter earnings report. The move isn't all that surprising, though, since the company said back in April that it had been reviewing options for its Teavana stores.

So, maybe it's not that we're not so into tea, it's just that we don't need a special spot for it? The Annapolis, Maryland-based tea retailer had operated at the mall at University Parkway and Interstate 75 for just under a year before it filed for Chapter 11 bankruptcy. "The problem is the rent is not 30-40 percent lower". However, by early 2016, Starbucks gave up on developing its smaller brand stores, deciding to focus its tea products into its existing Starbucks locations.

The frequency of visits of consumers has remained stable compared to a year ago.

Competition has intensified in the USA restaurant industry, making it challenging for chains to get customers to visit their stores more often.

Johnson dismissed the idea that such promotions affect Starbucks, saying that the "value players" are competing in a different segment. The company operates more than 25,000 locations, including standalone stores and retail outlets inside larger stores.

Dunkin Donuts also reported that traffic to its established USA locations declined in recent reports, and McDonald's has increased competition with $1 sodas and $2 McCafe smoothies, frappes, and shakes, CBS News reported.

The Teavana store closures follow news that Starbucks will purchase the remaining 50% stake in its East China joint venture for about $1.3 billion.

Unlike in the U.S., though, Starbucks' ambitions in China aren't rooted exclusively in physical coffeeshop locations-be they standalone stores or shopping mall spots.

Starbucks had net income of $2.8 billion on revenue of $21.3 billion in 2016. Excluding one-time items, it earned 55 cents per share, in line with Wall Street expectations.

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