How Financial Modelling and Network Analysis Guide Store Divestment Decisions: Lessons from Starbucks Malaysia

Deciding whether to invest in, renew, or divest a store is rarely straightforward. Rising costs, shifting consumer preferences, and competitive pressures mean that each location must be assessed not only on its own performance but also on how it contributes to the overall network. Two approaches that provide clarity are financial modelling and network analysis. Starbucks Malaysia, which has recently closed multiple outlets following significant financial losses, offers a useful case study in how these tools can shape decision making.

Financial Modelling: Measuring Store Value

Financial modelling provides the quantitative foundation for divestment decisions. Techniques such as Discounted Cash Flow (DCF), Net Present Value (NPV), and Internal Rate of Return (IRR) estimate whether future returns justify ongoing investment. This allows management teams to see how projected sales, costs, and capital requirements balance against expected benefits.

In Starbucks Malaysia’s case, the company reported heavy losses in 2024 and 2025, with revenues falling sharply as consumer boycotts and stronger competition took hold. When a store faces declining foot traffic but rising operating expenses, financial models typically reveal that the outlet will not generate enough return to justify refurbishment, lease renewal, or further capital expenditure. These models also allow sensitivity testing: what happens if sales fall by another ten percent, or if rental escalations exceed inflation? By running such scenarios, leadership can gauge whether a store is resilient or vulnerable to future shocks.

The strength of a DCF approach is that it highlights where capital should be spent most efficiently in a world where capital is constrained. By comparing outlets, management can channel limited funds into projects with the highest value creation while identifying stores that dilute returns. This discipline ensures scarce resources are deployed strategically, rather than spread thin across an underperforming portfolio.

Network Analysis: Seeing the Bigger Picture

Financial results alone do not tell the whole story. Network analysis evaluates a store’s role within the wider footprint and identifies whether divestment strengthens or weakens the brand’s market position.

Key considerations often include:

• Catchment overlap: Are nearby outlets competing for the same customers, leading to cannibalisation?

• White space: Could capital and resources be redeployed to an underserved area?

• Competitor dynamics: Does closing a store create an opportunity for rivals to gain share?

• Lease commitments: Long-term leases can be a pivotal factor. An outlet locked into a costly lease may become a liability if revenues decline, making early exit or renegotiation central to the decision.

• Operational efficiency: Does the store contribute to logistics, distribution, or brand visibility that supports the rest of the network?

For Starbucks Malaysia, some closures appear to have targeted locations with high overlap and weak revenues, while retaining outlets that remain strategically valuable. In several cases, employees were reassigned rather than retrenched, suggesting a network-wide view shaped the final decisions.

Why Both Matter

Financial modelling answers the question: Is this store financially sustainable? Network analysis asks: Does this store strengthen or weaken the overall network? Used together, they provide a balanced approach.

If financial modelling indicates losses but network analysis shows a site is strategically critical, leadership may still choose to retain it. Conversely, if a store shows modest profit but overlaps heavily with another site or carries a burdensome lease, divestment might be the smarter long-term move. Starbucks Malaysia illustrates how combining these perspectives helps avoid short-term cost cutting that undermines long-term brand strength.

Conclusion

Store divestment is not simply about shutting underperforming outlets. It is about reshaping networks, reallocating capital, and managing lease obligations in ways that safeguard long-term value. The Starbucks Malaysia case highlights how financial modelling and network analysis together inform these high-stakes decisions.