Inter IKEA, the owner of the world's biggest furniture brand, reported higher profits for 2024 thanks to lower interest payments, despite a sharp decline in revenues after it cut prices across its range of products like BILLY bookcases.
The price reductions are an attempt to boost IKEA's affordability after it hiked prices significantly in 2021-2022 when supply chain disruptions raised raw material costs.
Inter IKEA, which supplies the stores to which it franchises the IKEA brand, lowered its prices by an average of 15% over the year, Chief Financial Officer Henrik Elm said.
This allowed IKEA retailers to cut prices for customers by an average of 10%, after the cost of commodities like wood fell.
Price cuts drove Inter IKEA's revenues down 8.9% to €26.5 billion for its financial year ending August 31. But Inter IKEA said lower prices were encouraging customers to buy more, helping to boost operating profit to €2.3 billion, up from €2.2 billion in 2023.
"You could say that, in rough terms, we are back to where we were pre-Covid in prices, if you would adjust it for inflation," said Elm, adding that the company aims to bring prices down further this year but could not give an estimate.
Price cuts impacted Inter IKEA's wholesale sales to retailers and also hit Inter IKEA's franchise fee of 3% of net sales that it collects from them.
Still, net profit jumped to €2.2 billion, up from €1.6 billion last year, mostly due to lower interest rate expenses after it settled a large loan last year.
Inter IKEA opened a new factory in Slovenia and is expanding a factory in Sweden as part of investments in its manufacturing. Around 10% of the products Inter IKEA sells are made in its own factories, with the remainder sourced from external suppliers.
The IKEA franchisor also said it signed a deal to acquire IKEA retail operations in Estonia, Lithuania and Latvia from current franchisee Hof Group, with the purchase set to close in December if it gets regulatory approvals.
IKEA store operator Ingka Group sells last Russian asset - reports
Ingka Group, which runs most IKEA stores globally, has sold its final asset in Russia, a warehouse near Moscow, to Russian businessman Robert Uzilov, the RBC business daily reported today, citing three unnamed sources.
Ingka sold its 14 MEGA-branded shopping malls in Russia to Gazprombank Group in September 2023, joining scores of Western companies abandoning the Russian market after Moscow sent its army into Ukraine in February 2022.
RBC, which cited two unnamed sources in Russia's commercial real estate market and a unnamed representative of Uzilov, did not report the price. Reuters could not independently verify the report.
When finalising the shopping malls sale, Ingka Centres, which had been present in Russia for more than 20 years, said the deal would leave the company with no more operational business in the country.
