Ikea pre-tax profits fall 40% despite €2m spent per week

Shoppers spent almost €2m per week at Ikea’s Irish store in Dublin last year as the outlet recorded a 40% drop in pre-tax profits to €6.8m.

Accounts just filed by Ikea Ireland Ltd to the Companies Office confirm that revenues at the Ballymun store fell 7%, from €110.7m to €102.8m, in the 12 months to the end of August last.

The store failed to repeat the pre-tax profits of €11.4m recorded in its first full year of operation in Ireland.

However, in their report, the directors believe “Ikea will continue to gain market share during this slow down”.

On the continuing recession, they state: “The financial services crisis, and its spill into the real economy has adversely affected the Irish retail environment and trading of the company. However, these threats are not considered to be significant.”

The Dublin outlet — which is equivalent in space to five-and-a-half soccer pitches — contains 9,000 home furnishings, a 550-seater restaurant, food hall and crèche. along with 1,850 car parking spaces.

The report states: “We continue to invest in our prices in the long term and to improve the shopping experience of our customers.

“We continue to believe that we can further strengthen our position in the market as a value-for-money retailer during these difficult times.

The figures show the firm’s gross margin declined from 35% to 32% last year.

Ikea’s cost of sales declined by 3.7% last year, from €71.6m to €68.9m.

Administrative expenses decreased from €26.7m to €25m.

Operating profit fell by 28% last year, from €12.2m to €8.8m.

Higher bank interest payments also hit the firm’s profits, with interest payments increasing last year by 149%, from €821,707 to €1.98m.

The figures show the company had accumulated profits of €3.6m last year, with shareholder funds topping €8.6m.

The company’s cash more than halved from the previous year, falling from €3m to €1.4m.

The value of Ikea’s land and buildings in Ireland increased from €78.7m to €80.6m during the year.

The figures show that the numbers employed by the firm dropped marginally during the year, from 452 to 449, with staff costs also declining, from €9.4m to €8.4m.

The directors confirm that Ikea’s Dublin outlet has net liabilities of €27m, but add that they “are confident that the company has access to additional funding if required should the working capital needs of the company significantly differ to current forecasts as a result of deterioration in trading conditions”.

Last year, globally, Ikea’s revenues increased from €23.8bn to €26bn, with the number of store visits by customers increasing from 699m to 734m.