How REI’s Store Closures Threaten the New CEO’s Employee Strategy
When a company announces the closure of high-profile, unionized retail locations, it sends a signal to its workforce far beyond the immediate financial or operational rationale. In REI’s case, the closures of its SoHo flagship in New York City and its Boston store (among others) risk derailing the cultural and leadership gains that the new CEO, Mary Beth Laughton, is attempting to establish.
Below, we explore how the moves could backfire from the perspective of employees, what management might lose in terms of credibility, and how this could complicate a transformation agenda aimed at earning internal buy-in.
Context: New CEO, A Turnaround Plan—and Already Tough Decisions
Before diving into the fallout, some necessary background:
- In 2025, REI announced that it would close three stores: the SoHo location in New York, the Boston store, and one in Paramus, New Jersey.
- The closures are slated for 2026 (with Paramus in Q1, SoHo and Boston later)
- The company is executing a turnaround strategy, branded Peak 28: Ascending Together, under Laughton’s leadership. She has acknowledged that “tough choices” are necessary to focus resources and strengthen the co-op for the long haul.
- REI has already shed noncore parts of its business, including shuttering its “Experiences” division and laying off over 400 staffers earlier in 2025.
- The SoHo and Boston stores were among the 11 REI locations that had unionized in recent years, making them more visible and politically significant inside the company.
Taken together: the new CEO came in during a challenging moment, with a mandate to reset and refocus. The closures are, as the company says, part of that reset. But for employees, they pose serious risks to morale, credibility, and trust.
The Risks to Employee Trust and Morale
1. Undercutting the Message of “Inclusive Transformation”
One of the hallmarks of any credible CEO pledge is that “everyone is in this together.” But closing major flagship stores sends a counter-message: “You are expendable, and tough calls override your local stake.” Especially when the stores closing are unionized, in major coastal cities, the optics are stark.
Employees may interpret the closures as proof that leadership is willing to sacrifice front-line teams to protect corporate or headquarters. The tension between a “shared sacrifice” narrative and visible store shutdowns can breed cynicism: why incur personal or local costs if the leadership is insulated from consequences?
2. Disproportionate Impact on Unionized Workers
Because SoHo and Boston stores were unionized, their workers are more empowered—both legally and symbolically—to push back, demand explanations, or file charges. Those employees may see the closures as punitive or retaliatory, especially given long-running tensions between REI and worker organizing efforts.
If the closure process is perceived as heavy-handed (poor communication, inadequate transfer or severance options, unilateral decisions), it could provoke grievances, public pushback, or hurt the relationship between leadership and organized workers.
3. Erosion of Psychological Safety
A major ingredient in winning over employees—especially in a turnaround—is cultivating psychological safety: the sense that employees can surface concerns, experiment, challenge assumptions, and speak truth to power without fear of retribution. But store closures tend to shrink perceived safety margins.
Workers elsewhere may fear, “If they shut SoHo, why not my location next?” The decision heightens uncertainty: who is “safe” and whose role might be next? That anxiety chips away at discretionary energy, stifles innovation, and makes change initiatives harder.
4. Reputation Risk and Employee Identity
Flagship stores carry identity and pride. SoHo in particular was not just another outlet; it was a brand showcase in New York City, in a historic building, and among REI’s most visible spaces.
Losing such icons may feel symbolic—“The company is pulling back from its showpiece presence.” This can weaken the emotional bond between employees and the broader mission, especially among brand ambassadors, store teams, and veteran staff.
5. Disbelief of Leadership Promises
A CEO trying to build credibility with employees relies heavily on consistency between words and actions. Announcing an agenda of empowerment, transparency, transformation, and investment, and then simultaneously closing marquee stores can create cognitive dissonance.
Employees may begin to discount future promises about retraining, growth, or new investments. Instead, they may infer that tough financial decisions will always override humane or culture-first approaches.
Downstream Effects That Can Hamper the Transformation Agenda
Slower Uptake of New Initiatives
When employees question leadership’s motives or sincerity, adoption of new processes, systems, or cultural changes slows. People revert to default patterns—“stick with what works, hedge your bets, don’t take risks.” That undermines agility and the ability to pivot into growth areas.
Talent Flight or Quiet Attrition
High performers, especially those with options, may interpret closures as warning signs of instability. They may jump ship early, leaving a weaker base of staff who are less likely to lead. Even those who stay may disengage (“I’m just waiting until something better comes along”).
Negative Spillover to Brand Perception
Employees often internalize public reactions to store closures. If customers or media portray the company as retrenching, failing, or abandoning communities, employees may feel shame or second-guess alignment. That undermines pride and internal morale campaigns.
Union and Labor Relations Complexity
Given that SoHo and Boston were unionized stores, the closures may provoke legal challenges, grievances, or pushback through bargaining channels. That distracts leadership, saps resources, and increases tension between management and shop floors. If unresolved, it can poison the trust environment in union and nonunion locations alike.
Disproportionate Operational and Support Strain
Logistics of closures—handling inventory, transferring staff, shutting leases, managing member transfers—require managerial bandwidth. That can distract from core transformation tasks. Meanwhile, support teams (HR, legal, operations) may be drawn into crisis mode, reducing capacity for the “rising tide lifts all boats” work.
Mitigating the Damage: What the New CEO Must Do (and Hard Realities)
A closure is not necessarily fatal to employee trust, but mitigating its harm requires deliberate, consistent, and sometimes painful work. Here are key strategies and pitfalls:
1. Overcommunicate Early and Often — With Empathy
Employees must hear “why” before they hear “what.” The rationale must be robust, credible, and transparent—not just financial but strategic, local performance, lease realities, opportunity cost. Acknowledging the pain, validating emotions, and offering forums for Q&A can help contain fear and rumor.
2. Provide Clear, Preferential Redeployment or Transfer Options
To the degree practicable, affected store staff should get priority placement or relocation assistance to other stores or roles. If some cannot move, severance packages should be perceived as generous and fair. If these aren’t delivered, resentment will fester.
3. Honor Legacy and Symbolism
Just closing a facility is not enough; the company should honor what the store meant to local staff and customers—through commemorations, internal stories, and a narrative that the closure is painful but necessary. Let store leaders, long-tenured employees, and locals contribute to the closure narrative.
4. Tie the Closure to a Broader Narrative of Investment and Growth
The CEO must show that this is not contraction but reallocation: closing underperforming or high-cost assets so that resources can be redeployed into higher-growth areas (e.g. digital, new store formats, member experiences). If the closure stands alone without visible reinvestment, the narrative sounds hollow.
5. Track and Share Wins That Benefit Existing Employees
To rebuild trust, the CEO needs quick, visible wins for remaining workers: improvements in tools, new pilot programs, enhanced training, better work environments. Those wins act as salves to the wounds of closure.
6. Maintain and Deepen Two-Way Feedback
Especially in times of disruption, listening tours, skip-level meetings, town halls, pulse surveys, and anonymous feedback channels become essential. Leaders must act visibly on the feedback to show they are responsive, not dictatorial.
7. Unite Around Purpose
One of the strongest defenses during tough times is to anchor the workforce in mission and purpose. REI’s brand is deeply tied to outdoor access, sustainability, community. The CEO must consistently tie every change to the purpose: “Why we are doing this change is to ensure we can deliver on mission in the long run.”
Why the Stakes Are Especially High in New York / Boston Closures
These aren’t just any store closures; their location and status aggravate the risks:
- Flagship presence: SoHo is a marquee, highly visible store. Its closure is not invisible; it invites press scrutiny and community commentary.
- Union history: The fact that these are among the unionized stores raises the stakes in labor optics and internal morale.
- Cultural hubs: New York and Boston are culturally significant markets. Losing presence there feels like retreat from major cosmopolitan markets, which may hurt employee pride in the brand.
- Symbol of commitment: For employees around the country, seeing closures in such prominent, costly cities can raise doubts: if you can’t succeed in New York or Boston, what geography or store is “safe”?
In short, these closures represent not just cost rationalization but potential symbolic turning points in how employees view leadership commitment to them.
Conclusion: A Risky Gamble on Credibility
A CEO’s legitimacy in a turnaround depends heavily on trust, consistency, and the belief that leadership honors values, not just balance sheets. Announcing store closures in New York and Boston—both high visibility, unionized, and symbolically potent—complicates that task dramatically.
The closures may be defensible on financial or portfolio rationalization grounds, but mismanaging the narrative, the human impact, or the reinvestment story can turn them into credibility poison.
If Mary Beth Laughton hopes to bring employees along on a multi-year transformation, these closures must be more than cold cuts; they need to be integrated into a humane, transparent, purposeful roadmap—one that demonstrates care for people even in the hardest of times. Otherwise, she risks losing legitimacy before she’s fully begun.