Starbucks shuttering Teavana stores as sales disappoint

Company says its 54 Canadian locations will be closed by the end of September

Starbucks plans to shutter all its Teavana stores, including its 54 locations in Canada, by next spring as it seeks to improve sales at its namesake coffee stores.

The company said Thursday it would close all 379 Teavana locations over the coming year.

The first Teavana stores to close will be in Canada and will do so by the end of September, the company said in a statement.

The closures will see about 3,200 employees lose their jobs, said spokeswoman Madeleine Lowenborg-Frick in an email, adding the company could offer work opportunities to interested employees at Starbucks locations near to them.

Starbucks acquired the mall-based chain in late 2012, with then-CEO Howard Schultz noting the huge potential for the tea market. Then this past April, the company said it was reviewing its options for the struggling chain.

On Thursday, Starbucks CEO Kevin Johnson noted declining foot traffic at malls.

"We felt it was an appropriate time to take the decision and begin shutting down those stores," he said.

The announcement came as Starbucks said global sales rose 4% at established locations for the quarter ended July 2, fueled by higher average spending per visit. But the frequency of customer visits was flat from a year ago.

In the U.S., sales rose 5% at established locations, also driven mostly by higher spending. The Seattle-based company cited "ongoing macro pressures impacting the retail and restaurant sectors" that have made it more cautious going into the next quarter.

Competition in the U.S. restaurant industry has intensified, and Dunkin' Donuts said earlier in the day that customer traffic fell again at its established U.S. locations. McDonald's, meanwhile, has been promoting $1 sodas and $2 McCafe drinks, a strategy the burger chain said helped bring in customers during the second quarter.

Johnson said that promotion didn't affect Starbucks, because the "value players" are competing in a different segment.

In its Asia unit, Starbucks's sales rose just 1% at established locations during the three-month period. Starbucks has announced plans to acquire the remaining 50% stake of its East China joint venture that it does not already own, making it the operator of all Starbucks stores in mainland China.

For the quarter, Starbucks earned $691.6 million. Total revenue was $5.66 billion, less than the $5.76 billion expected.

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