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Starbucks to close 150 stores as sales growth cools

"Starbucks effect" on real estate

Starbucks says it will accelerate its store closings in the U.S. next year to counter cooling sales growth.

The Seattle-based company announced Tuesday that it will close 150 underperforming stores in heavily penetrated markets, up from the usual rate of 50 closings a year. 

Starbucks now operates about 13,900 locations in the U.S., putting it within sipping distance of the 14,400 restaurants operated by McDonald's. In the past year, Starbucks has opened almost 1,000 new stores in the Americas, which includes the U.S., Canada and Latin America. One analyst estimates that new stores may be cannibalizing traffic from existing stores, potentially diverting 1 out of 7 transactions. 

Competition from rivals like McDonald's and Dunkin' Donuts is heating up, said Bernstein analyst Sara Senatore in a research note.

"Intensified competition in the slushy coffee category is exacerbating the shift towards health and wellness weighing on Frappuccino demand," she wrote. "Starbucks will focus on Teavana drinks and other more healthful options in its core offering, which it views as 'more differentiated.'"

The company also said it expects 1 percent growth in global sales for the third quarter, a period that encompassed an uproar over the arrest of two black men at a Philadelphia Starbucks. Starbucks closed its U.S. stores on May 29 to conduct racial-bias training for its employees.

CEO Kevin Johnson told investors the company halted its marketing campaign for cold beverages while it addressed with controversy, which may have affected sales.

Starbucks shares slipped nearly 2 percent in after-hours trading.

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