Starbucks is making the tough but necessary call to further reduce its workforce in order to achieve the next step in its turnaround: increasing profits. The coffee chain announced it would cut 300 U.S. jobs and close several local corporate offices as part of a broader restructuring tied to a $2 billion cost-cutting plan. This is the latest move in the company’s turnaround, dubbed “Back to Starbucks,” under CEO Brian Nicol, who took over in September 2024 with a mission to regain the global brand’s lost momentum. On Friday’s “Squawk on the Streets,” Jim Cramer said the move is Nicol’s “trying to get our margins right.” “Once he gets the margins right, he’s able to play offensively.” The cuts are no surprise at all. This is the third layoff at Starbucks under Nicol’s administration, and reinforces a consistent message from management that the company needs to right its cost structure after years of poor performance. In February 2025, Mr. Nicol announced that the company would cut 1,100 jobs and not fill hundreds of other vacancies. A few months later, the company announced it would cut an additional 900 non-retail employees as part of a $1 billion restructuring plan. “He (Nicole) kept saying we had to get it sized right,” Jim said. “This is it. He’s done with it,” Jim added. Starbucks said the restructuring will result in approximately $400 million in costs, including $280 million in write-downs due to the decline in the value of certain long-term assets (buildings, equipment) and $120 million in cash charges related to severance benefits. Most of the plan’s efforts are expected to be completed by the end of fiscal year 2026, and a Starbucks spokesperson said in a statement to CNBC: “We are committed to taking further steps under our Back to Starbucks strategy to build on our strong business momentum and return the company to sustainable, profitable growth.” “Leaders are taking a hard look at their jobs to further sharpen their focus, prioritize work, reduce complexity and reduce costs.”Starbucks stock jumped 1.5% on Friday, giving investors reassurance that CEO Brian Nicol is keeping his promise to undertake the next phase of the company’s turnaround. The first phase focused on reigniting comparative sales, which were on the rise. Starbucks’ turnaround has taken longer than some investors initially expected, but given the complexity of Starbucks’ multifaceted global business, “people are willing to give him time,” Jim said. “That’s why the stock price is going up.”Starbucks stock has risen more than 9% in the past month and has returned 28% year-to-date. At Friday’s morning meeting for club members, Jim said he had the opportunity to speak with Starbucks CEO Brian Nicol earlier this morning, who was told the move was business as usual. The layoffs come a day after TD Cowen raised his stake in Starbucks. The company expressed confidence in the pace of the turnaround, noting that Starbucks’ management is striking the right balance between investing in rebuilding the brand and offsetting costs through corporate layoffs. The bottom line is that Starbucks’ recovery will depend on its ability to improve its profits. This layoff announcement is a cost-cutting opportunity and should continue to shift the narrative from skepticism to optimism that Nicol is firmly committed to reviving Starbucks. We maintain a $115 price target and a 2 rating on the stock. This means waiting for a pullback before buying more.
