Main IKEA Retailer’s Profits Jump Despite ‘Unprecedented Challenges’

Main IKEA Retailer’s Profits Jump Despite ‘Unprecedented Challenges’
The IKEA logo is seen on shopping carts inside an IKEA store in Navi Mumbai, India, on Dec. 17, 2020. (Francis Mascarenhas/Reuters)
Reuters
11/30/2021
Updated:
11/30/2021

STOCKHOLM—Ingka Group, the owner of most IKEA stores world-wide, reported on Tuesday a jump in annual profit on the back of record demand for home furnishing as people stay at home more due to the pandemic.

Despite more temporary store closures due to pandemic related restrictions than the year before, and product shortages due to the global supply chain crisis, operating profit in the 12 months through August was up 31 percent at 1.9 billion euros. Sales were up 6 percent, to above pre-pandemic levels, with online sales jumping to account for 30 percent of total sales, against 18 percent the year before.

Compared to the pre-pandemic fiscal 2019, profit was still down, by 8 percent, due to high investment levels. Capital expenditure was up 52 percent on the year, at 3.2 billion euros, as Ingka accelerated investments in digitalisation, new inner-city store formats, existing stores, and distribution, and delivery networks.

Chief Financial Officer Juvencio Maeztu told Reuters he expected sales to grow also in the current fiscal year, and profits to be at least as high as in the past year. Investment levels would probably remain at least as high as in the past year, he said.

“Our journey to create a better IKEA forges ahead in a world that faces unprecedented challenges. COVID-19 will continue to impact our business and the communities we are a part of,” the company said in a statement.

“The global supply and transport crisis will require a resilient, flexible response. Efforts across the value chain will continue to mitigate the challenges with product availability, inflation, prices of raw materials and transport that are expected to continue into FY22.”

Budget furniture brand IKEA operates through a franchise system, with Ingka the main franchisee to brand owner Inter IKEA with 392 stores including city stores, and 73 smaller store formats.

Inter IKEA, which is in charge of design and supply, in the past year absorbed substantially higher costs for raw materials and transports, but has flagged it will raise prices to its retailers this year in the face of continued high supply related costs.

Ingka’s Maeztu said in the interview that he could not rule out that Ingka would also raise prices this year.

By Anna Ringstrom