Ikea group sees consumer recovery worldwide, posts record profit

World's leading furniture retailer posts record net profit of 3.3 billion euros and says it sees growth in consumer demand worldwide

PUBLISHED : Tuesday, 28 January, 2014, 4:44pm
UPDATED : Tuesday, 28 January, 2014, 4:44pm

The Ikea Group, the world’s top furniture maker, said on Tuesday it saw signs consumer spending was starting to recover in many of its markets as it posted record full-year profits.

Retailers have been struggling particularly in Europe, where Ikea generates nearly 70 per cent of its sales, as the global economic downturn and austerity measures, mostly in euro zone countries, hurt consumer sentiment and spending power.

Ikea, whose warehouse-like stores sell everything from highchairs to fitted kitchens, posted a net profit of 3.3 billion euros (HK$35.5 billion) in the 12 months through to August last year, up 3.1 per cent on a year earlier.

“Consumer spending is improving in many countries,” Ikea CEO Peter Agnefjall said in a statement. “While the challenging economic situation may not be over, there are positive signs.”

IKEA said it had seen strong growth in China, where it opened two new stores, as well as in Russia and the United States.

Southern Europe, still suffering from the effects of the downturn, was showing some positive signs, but sales fell in Spain and Italy, the company said.

Figures published in October showed that while sales at Ikea rose 3.1 per cent to 27.9 billion euros in the last year financial year, sales in comparable stores grew by 1.8 per cent.

The company said it planned to invest 2.5 billion euros this fiscal year in stores, factories, renewable energy and shopping centres.

“By creating better products at lower prices, being more inspiring, improving our existing stores, opening new stores and expanding our e-commerce offer, we plan to double sales by 2020,” Agnefjall said.

Growth will mainly be in existing markets – in China it has opened 11 stores in a decade, but also in new markets such as India, where it plans to cash in on demand from a growing urban middle class.

After getting approval from the Indian government Ikea is now looking at sites for its first store.

But while Ikea enjoys instant brand recognition – the company claims that with a publication run of 212 million copies last year in 29 languages, its catalogue is the second-most-read publication after the Bible – it faces increased competition.

Companies such as German firm Home24, for example, are betting shoppers will increasingly look online for furniture as they are doing in growing numbers for products like fashion and food.

While Ikea sells online in half its 26 markets, it has been relatively slow to embrace the internet.

But the Swedish group is now aiming for online availability in all its markets, but does not say when it will achieve that. Neither will it say what percentage of its sales currently come via the internet.

Research firm Euromonitor forecasts that global e-commerce sales of home furnishings will grow by almost 10 per cent a year to US$24 billion by 2015 from US$20 billion 2013.

Ikea’s more than 300 stores in 26 countries attracted about 680 million customers during the year. The company employs 135,000 people worldwide.