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Ikea’s annual revenue nearly halved to the second-lowest stage in not less than a decade because the flat-pack furnishings pioneer warned that commerce limitations from US president-elect Donald Trump would damage its push to chop costs.
Internet revenue at Ingka Group, the primary Ikea retailer that runs 90 per cent of the group’s shops, fell from €1.5bn to €806mn within the yr to August resulting from a marketing campaign to defend shoppers from greater inflation, in addition to the price of its exit from Russia.
The privately held retailer, primarily based within the Netherlands and owned by a Dutch charitable basis, offered 14 Mega buying centres to Gazprombank final yr, however declined to specify the worth or the hit to income. It spent €2.1bn chopping costs in a bid to enhance the affordability of its merchandise, resulting in a 5 per cent drop in income to €41.9bn.
“In essence, we’re constructed for goal,” Juvencio Maeztu, Ingka’s deputy chief government, informed the Monetary Occasions. “This yr, we’re strolling the speak . . . It’s not really easy to say bye bye to €2.1bn nevertheless it’s so courageous.”
Ingka’s internet revenue was the bottom it has been previously decade other than 2022, when provide chain woes and rising uncooked materials prices dragged it down to simply €287mn. In 2019, the final yr earlier than the Covid-19 pandemic, Ingka, one of many two major corporations within the complicated construction making up the Ikea empire, recorded a internet revenue of €1.8bn.
Ikea was unnerved by having to boost costs resulting from surging inflation following the pandemic because it historically reduces the price of merchandise steadily over time.
“It was a aware choice to not optimise revenue however to maximise affordability for the many individuals,” mentioned Maeztu, including that the corporate’s construction and possession enabled it to make long-term choices.
Ikea anticipated to maintain costs broadly unchanged this yr and the primary months of its monetary yr had developed nicely with “us promoting extra quantity”, mentioned Maeztu.
About five-sixths of Ikea’s income are reinvested into the enterprise with the rest used to fund the charitable work of the Ikea Basis.
Ikea is anxiously watching the threats that Trump’s second administration might impose tariffs on imports from China, Mexico and Canada, and presumably the EU. The US is Ikea’s second-biggest marketplace for gross sales with 13.2 per cent of the entire — or about €5.5bn yearly — behind solely Germany.
The world’s largest furnishings retailer sources about 70 per cent of its merchandise from Europe with practically all the rest coming from Asian international locations corresponding to China, India and Vietnam.
“In the long run, commerce limitations are usually not supporting affordability . . . For us, what’s essential is that we’re decided to make Ikea as reasonably priced as attainable for the many individuals,” mentioned Maeztu.
Ikea had tried so as to add flexibility to its provide chain after the pandemic and was coping nicely with the disruption within the Crimson Sea for sea freight from Asia to Europe on account of assaults by Houthi rebels on vessels, added Maeztu.
