Impending price increases in IKEA

IKEA is anticipating price increases following the reveal of their financial results for FY2021 up to 31 Aug 2021.

Reasons for the increase are plenty. According to IKEA, the business outlook remains “extremely challenging” despite economic recovery, with more than 150 stores closed due to lockdown, resulting in lower store sales. Another reason is the global transportation disruption due to the pandemic, which increased prices for shipping and raw materials even though the demand is high. Inter IKEA Group has spent an additional €250 million to mitigate these disruptions.

However, e-commerce sales increased by 73%, total retail sales by IKEA franchisees’s amounted to €41.9 billion, a 5.8% increase year-on-year. FY2021 sales also surpassed FY2019, reaching €41.9b.

“This year, IKEA e-commerce accelerated and now accounts for 26% of total retail sales. But stores welcomed only 775 million visitors compared to more than one billion in FY19. To keep products affordable and meet changing customer needs, we’ve invested heavily in the IKEA supply chain,” said Martin van Dam, CFO of Inter IKEA Group. The additional investment led to a lower financial result compared to FY2020, with €1.4b in FY21 compared to €1.7b in FY20.

van Dam continued: “Raw material shortages and the global transport crisis have impacted Inter IKEA Group margins. Although our costs increased, we did our utmost by keeping the prices to our retailers stable in FY2021. Though we can’t continue to secure fixed prices to the retailers under these challenging conditions, we also plan to absorb part of the increased costs during FY2022.”

“Despite the challenges, Inter IKEA Group will continue to invest in the IKEA franchise system and value chain to create a more affordable, accessible and sustainable IKEA for the many people,” concluded van Dam. They will also invest in other areas such as product development, initiatives to reduce their climate footprint, and expansions and further developments of new store formats. Around 45 new IKEA locations (including tests) opened in FY21, including the first stores in Mexico and Slovenia. Franchisees also started e-commerce operations in the Philippines.

Source: Furniture News