Oolong, farewell: Starbucks is closing its Teavana stores

Oolong, farewell: Starbucks is closing its Teavana stores

All will close within the next year, with the majority being shuttered by the spring, Starbucks said in a financial statement on Thursday.

The deal, which follows an 8.3 percent drop in net earnings this quarter, will see Starbucks add to its 1,500 current stores in China with 1,300 more in Shanghai and the Jiangsu province.

Starbucks announced on Thursday that all 379 Teavana stores - which are primarily based in malls across the country - have been "underperforming".

"Following a strategic review of the Teavana store business, the company concluded that despite efforts to reverse the trend through creative merchandising and new store designs, the underperformance was likely to continue", Starbucks said in a press release.

The Seattle-based coffee chain acquired Teavana in 2012. The coffee chain will continue to offer a wide variety of hot tea options at most locations, as well as iced green, black and other flavored, blended tea beverages, such as Shaken Berry Sangria tea or the new Shaken Iced Pina Colada Tea Infusion, a "creamy and tropical beverage crafted with Teavana black tea, pineapple fruit and botanical blend, and coconut milk".

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Facing tepid growth in the U.S. market, Starbucks has announced it will step away from its flagship tea business, and shift focus to China. The Annapolis, Maryland-based tea retailer had operated at the mall at University Parkway and Interstate 75 for just under a year before it filed for Chapter 11 bankruptcy. In the last six months, Starbucks has seen more than 2 million social media gift transactions through Tencent-a number that far outpaces what is seen in the USA, the company said. Starbucks brought the Teavana brand into Starbucks locations, held on to Teavana's own retail stores, and even opened a few high-end Teavana Fine Teas Tea Bars.

RBC Capital Markets analysts said about 36% of the company's US revenue in the third-quarter came from Starbucks rewards members, which makes the stall in user growth a cause for concern.

Johnson said that promotion didn't affect Starbucks, because the "value players" are competing in a different segment.

Teavana had stores in the U.S., Mexico, Canada, Puerto Rico, and the Middle East, the Journal reported. Instead, Teavana products began to show up on the standard Starbucks menu, including an Oprah-endorsed chai and a piña colada-themed tea drink. Starbucks said it plans to be operating 5,000 stores in China by 2021. The majority of brick and mortar Teavana stores are located inside of these former consumer hotspots, so it's no wonder Starbucks Corporation has made a decision to do away with the flailing company.

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