Stockholm (AFP) – The world’s leading furniture company, Ikea, reported a sharp fall in annual profits on Friday as it focused on dropping prices to boost volume and faced higher costs due to US tariffs. The company said its profit after tax for the 2024-2025 fiscal year dropped 32 percent to 1.5 billion euros ($1.7 billion).
“We saw effects based on the big price decreases,” Henrik Elm, chief financial officer of main holding company Inter Ikea, told AFP in an interview. After bumping prices following the Covid pandemic, the Swedish giant has allocated between two and three billion euros to reduce prices by 10 percent over the past two fiscal years. “To lower our prices to our customers is a part of our business model and business idea,” Elm said.
While 10 percent was “a very big price decrease,” Elm said it had worked to break the trend and brought in both higher sales volumes and visitors to their stores. Ikea’s sales for its fiscal year ending in late August decreased by one percent to 44.6 billion euros, but sales volume increased by 2.6 percent and the number of store visitors rose by 1.9 percent.
Inter Ikea’s operating profit fell by 26 percent to 1.7 billion euros as a result of the lower prices combined with increased supply chain costs. “The higher sourcing costs included the costs for increased tariffs, which have been partly absorbed,” Inter Ikea said in a statement, referring to import taxes imposed by US President Donald Trump. The North American market accounts for 10 percent of Ikea’s sales.
At the same time, Inter Ikea has stocked up store’s inventories to ensure greater availability of products, Elm noted. “We are looking cautiously optimistic on (2026) and beyond because we are in a very good position to take the benefits we can,” he said.
Founded in 1943 in southern Sweden by the late Ingvar Kamprad, Ikea is not listed on any stock exchange and is therefore not obliged to communicate its financial results. Following accusations of a lack of financial transparency and tax optimisation schemes, the group started publishing partial results in 2010.
© 2024 AFP
