Starbucks Ditches Merit System, Gives 2% Raises To Corporate Staff After 6 Straight Quarters Of Sales Declines: Report

Starbucks Corp. SBUX is providing all North American corporate employees with a 2% pay raise this year, abandoning its merit-based increase system as the coffee chain works to control operational costs during its ongoing turnaround efforts.

Coffee Giant Implements Uniform Pay Increases While Managing Turnaround Costs

The Seattle-based company notified eligible corporate support workers, retail managers, and U.S. manufacturing and distribution employees about the uniform pay bump in an internal email on Monday, according to The Wall Street Journal.

Six-Quarter Sales Decline Pressures Cost Management

The raise comes as Starbucks faces its sixth consecutive quarter of declining same-store sales, a key metric closely watched by retail investors, according to WSJ. CEO Brian Niccol, who assumed leadership from Chipotle Mexican Grill Inc. CMG, is investing hundreds of millions in cafe improvements to revive customer traffic.

“As we make these significant investments, we need to carefully manage all our other costs,” the company stated in the internal message, according to WSJ.

Starbucks did not immediately respond to Benzinga's request for comment.

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Strategic Workforce Restructuring Continues

Earlier this year, Starbucks announced plans to eliminate 1,100 corporate positions and freeze hiring for several hundred open roles to streamline operations. The company also offered buyouts to corporate workers in July and increased office requirements from three to four days per week.

Remote managers reporting to support centers must relocate to Seattle or Toronto within 12 months under the new policy.

Market Performance Lags Restaurant Sector

SBUX shares have gained just 0.4% year-to-date compared to a 3.6% increase for the S&P 500 restaurant subindex. The company faces intensified competition from fast-growing rivals, including China’s Luckin Coffee, which has captured significant market share in key Asian markets.

Starbucks is implementing its “Green Apron Service” model with a $500 million investment in additional labor hours, targeting four-minute custom order completion across 11,000 U.S. company-operated stores by September.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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