Business World

Tuesday 19 November 2019

IKEA reports European revenues rising despite economy worries

The Ikea store in Ballymun, Dublin
The Ikea store in Ballymun, Dublin

IKEA Group, the world's biggest furniture retailer, expects a rise in European revenues to continue this financial year, with its focus on low prices helping it to cope in a struggling economy.

The privately-held Swedish company, which makes almost 70 percent of sales in Europe, said on Wednesday demand in previously crisis-hit countries such as Portugal, Spain and Italy had picked up in its financial year ending August 2014.

"We've seen a strengthening situation where consumer spending continues to increase, more people visiting the stores and buying more home furniture," CEO Peter Agnefjall told Reuters at the firm's Wembley store, north of London.

"We don't see any indication that that trend should change as we speak," he said.

Last week, the European Central Bank announced a 1.1 trillion euro ($1.3 trillion) plan to bolster the euro zone economy amid fears of stagnation and falling prices.

Agnefjall said IKEA, known for its flat-pack, self-assembly furniture, did not fear deflation because its business model was focused on keeping prices down.

Lower purchasing and transport costs helped it to reduce prices by an average of 1 percent in 2013-14.

However, a weak Europe remains a challenge for a group aiming to grow sales to 50 billion euros by 2020, which would require an increase of 9-10 percent a year -- well ahead of the current growth rate.

Agnefjall said that goal was a "guiding rail" rather than a "target hammered in stone".

IKEA, which has 222 of its 315 stores in Europe, had previously said sales rose 5.9 percent in 2013-14 to 28.7 billion euros, with stores open a year or more accounting for 3.6 percent.

It said on Wednesday that, with rental income from its shopping centres, total revenue was 29.3 billion euros, a 2.8 percent increase. It did not give a separate figure for Europe.

Net profit was flat at 3.3 billion euros, held back by a 200 million contribution to an employee loyalty programme and more staff taking part in a bonus programme.

IKEA, whose biggest single markets are Germany, the United States and France, said it grew share in almost all of its 27 territories. China, Russia and Hungary were the fastest growing.

Having opened 12 stores in 2013-14, IKEA is likely to expand at a similar rate this financial year, with a first opening in India a possibility, Agnefjall said.

"We had 716 million visits to our stores (in 2013-14) but there are 7.2 billion living on this planet, so IKEA is just at the beginning," he said.


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