Investment spend pulls Ikea annual profits down 26%

Ikea has reported a 26% fall in annual profits; due mainly to the impact of it heavily investing in improving its online and delivery offerings. 

A €2.8bn investment in online, stores, distribution networks, renewable energy and forestry led to a drop in operating profit to €2.25bn. 

Despite, this, the group’s retail sales increased nearly 5% in the year.

Ikea is facing competition from many sides. 

Online furniture stores such as Germany’s Home24 and Wayfair in the US are expanding, while general retailers ranging from online marketplaces such as Amazon to traditional department stores are branching out into home furnishing.

The figures also underline the growing importance of online sales to Ikea, something which the company more than hinted at when updating on its Irish operations earlier this month.

Ikea saw its Irish sales rise 7.4%, to €181.5m in the year to the end of August, heavily boosted by online sales. 

A total of €17.3m worth of goods was bought via Ikea’s Irish website and over 17 million visits were made to the site.

Ikea operates two stores in Ireland - in Belfast and Ballymun, in north Dublin. 

It also has an order-and- collection outlet in Carrickmines, in south Dublin, and last year launched its online sales channel.

Because of the significant growth in online sales here, Ikea confirmed it has no plans to open any more shops in Ireland. 

Investment spend pulls Ikea annual profits down 26%

There had been intense speculation that Ikea may open a third Irish store in Carrigtwohill, in east Cork, but that is no longer being considered.

“We have no plans for additional stores in Ireland at present. We think the multi-channel approach is the best way to meet customer needs,” said Ikea Ireland boss Claudia Marshall this month.

“The store’s ability to inspire consumers, in addition to expert advice from our co-workers, was a key factor in our success, together with the launch of our shop online channel,” she said of the Irish operation’s growth.

Regarding the latest group figures, Ikea’s chief financial officer Juvencio Maeztu said that the sales growth was “not bad” considering Ikea had mainly been a brick-and-mortar retailer in the past.

“There is a fast-moving retail landscape across the globe, and that’s why we are now taking these big investments,” he said.

He said that investments in the current fiscal year would be even higher, and then flatten out in the following year.

Additional reporting Reuters

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