Starbucks Store Closure Tuesday For Racial-Bias Training Could Cost Company Millions

A sign for Starbucks is seen on a street in New York City, May 11, 2018. Starbucks is closing its company-owned stores all over the country for about four hours Tuesday for racial-bias training of its employees, a move that would cost the company millions of dollars in lost revenue. Photo: HECTOR RETAMAL/AFP/Getty Images

By Himanshu Goenka, International Business Times

Coffee shop chain Starbucks is closing all its company-owned stores in the United States for about 4 hours Tuesday afternoon, along with its corporate offices around the country, to provide racial-bias training to its employees. The decision, included in the company’s first quarter results announcement April 26, was made as part of Starbucks chairman Howard Schultz’s efforts to change the public image of the company.

That image took a battering mid-April after an employee at a Philadelphia store called the police on two black men, who first wanted to use the store’s restroom, and then, when told it was for paying customers only, proceeded to sit and wait for a third person before placing their order. Their arrest led to protests and calls to boycott Starbucks, and recently led the company to brand itself as a “third place” — the place between home and work. Anyone can now use its restrooms, even if they were not purchasing anything.

Tuesday’s store closures are another step the company is taking to sensitize its employees, so it can avoid such potential trouble in the future, because these incidents bring both bad publicity and loss of customers, not to mention a hit to the company’s stock price. But closing the stores during business hours has a financial cost too. Just how much would that be?

According to the latest financial results announced by the company, for the January-March quarter, Starbucks had revenue of approximately $3.66 billion from its stores in the United States. That amounts to roughly $1.22 billion per month, or about $40 million every day. But this includes both company-owned shops as well as stores licensed under agreements with Starbucks.

Assuming its customers don’t make a distinction between stores based on ownership, the revenue could be split (for the sake of this calculation) evenly along all 14,000 or so Starbucks stores around the country. The company owns about 8,000 of those stores, so their daily revenue would be about $22.86 million. If the store was open for 12 hours a day, on average, then a 4-hour closure would cost the company roughly $7.5 million.

This rough-at-best calculation does not account for the intraday variations in sales of coffee, presumably higher in the mornings than in the afternoons, which is when the stores are closing. So the actual loss of revenue may be lesser.

But the figure isn’t too far off from the $6 million that Starbucks lost in revenue in 2008, when it closed its stores for an afternoon to retrain baristas on making espressos and steaming milk.

Jeff Sonnenfeld, a senior associate dean for leadership studies at Yale, told CNBC in April that Starbucks would lose about $12 million in missed sales during Tuesday’s closure, according to his estimate.

Shares of Starbucks closed 0.42 percent higher, at $57.92, on Nasdaq during Monday trade. On the day of the Philadelphia incident, they were trading at over $59.2, and had seen a low of $56.13 since.

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Business - U.S. Daily News: Starbucks Store Closure Tuesday For Racial-Bias Training Could Cost Company Millions
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