Inter IKEA posted a 26 per cent drop in operating profit, mainly due to higher costs and uncertainty over new US import tariffs. Sales remained almost flat, but shop sales declined again. Price cuts, however, increased sales volume.
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For the financial year ending 31 August, Inter IKEA reported an operating profit of 1.7 billion euros, up from 2.3 billion euros a year earlier. Sales fell slightly to 26.3 billion euros from 26.5 billion euros. According to the company, raw material prices and logistics costs rose especially in the second half of the year, due to uncertainty around US tariff announcements.
Global shop sales dropped for the second year in a row to 44.6 billion euros. IKEA lowered prices in many markets to accommodate customers, but actually had to make some products more expensive in the US due to increased import duties.
To reduce the impact of the tariffs, the company is moving parts of its production closer to its markets. For example, Lithuanian furniture group SBA, a major supplier to IKEA, recently opened its first factory in the US. It produces Billy bookcases and Kallax storage units, among others, for the US market there.
According to finance director Henrik Elm, the opening had been planned for some time, but "obviously comes in handy" as trade tensions mount.
Source: RetailTrends
