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Starbucks Plans a Gradual Reopening Based on Its China Experience

By Rhian Hunt - Apr 16, 2020 at 12:49PM

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Its executives paint a cautiously positive picture.

Starbucks (SBUX -0.55%) said in an update today it plans to start inching cautiously toward more normal operations following its shutdown of most in-store sales as the coronavirus pandemic gripped the U.S. The company has been limiting service to delivery and drive-through only, with an intention to keep its stores closed to regular customer traffic at least through May 3.

Now, Starbucks CEO Kevin Johnson declared the start of a "new phase" of its business model, which he terms "monitor and adapt." The company's outlets will watch the COVID-19 situation and use a set of clearly defined guidelines to add services when it's deemed safe to do so. Some arrangements potentially on offer, based on local conditions, include contactless pickup or limited seating in compliance with social distancing.

Several Starbucks beverages on a countertop.

Image source: Starbucks.

Johnson and CFO Patrick Grismer wrote an open letter today which they filed with the SEC as an 8-K Current Report. In the letter, the two executives state they're using the earlier Starbucks experience dealing with COVID-19 in China as blueprint for their strategy in the U.S. They note 95% of Starbucks locations in China are currently open, though with limited seating and reduced working hours as Chinese regulations in the wake of the coronavirus demand.

The executives say they expect a full recovery of Starbucks' Chinese business over the next two quarters. This leads them to predict a similar rebound in the U.S., with a return to the "very strong margin performance" seen before the pandemic. They also say Starbucks has approximately $3.5 billion in liquidity from borrowing, and that the quarterly dividend probably won't be reduced.

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