Starbucks Sued Over Teavana Mall Store Closures

When Starbucks Corp. (NASDAQ: SBUX) released second-quarter results a month ago, the company also said that over the next year it would close all 379 of its underperforming Teavana mall stores. On Wednesday, one of the country’s largest mall operators, Simon Property Group Inc. (NYSE: SPG), sued the coffee and tea purveyor seeking to block the closure of 78 Teavana stores located in Simon’s malls.

According to a report in the New York Post, which obtained a redacted copy of the lawsuit, Simon is not accusing Starbucks of trying to avoid paying its remaining lease costs.

The mall operator is concerned about the image of its malls as the public turns its back on the giant brick-and-mortar locations in favor of online shopping.

The Post cited the complaint:

Shuttering stores prematurely results in a ripple of negative, adverse economic effects in each shopping center’s community.

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The danger to mall operators comes from a domino effect, where other mall retailers could “exercise their co-tenancy rights, claiming that mall traffic declined” as a result of the Teavana store closings.

Starbucks is not the only chain-store operation that is closing stores, but it is the only one, according to Simon, that is doing so without having its back to against the bankruptcy wall.

Starbucks has agreed not to begin closing stores in Simon malls for 45 days as the two sides negotiate. A real estate attorney told the Post:

The proper way for Starbucks to handle this is to negotiate — maybe offering to replace a Teavana store with a Starbucks. This shouldn’t be in litigation.

We noted a report from eMarketer earlier this month that brick-and-mortar department stores — particularly mall-based stores — have registered a sales decline of about 6% on average for the trailing four quarters.

Starbucks has not commented on the lawsuit filed in Indiana.

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