Ikea axes more jobs as slump in housing market takes toll

Published on Tuesday 7 July 2009 21:23

IKEA is bracing itself for further job losses to cope with the global recession after it emerged yesterday that the iconic furniture retailer had already shed 5,000 jobs over the past ten months.

The chain's founder said the Swedish group must axe more posts to cope with the drop in consumer demand and the collapse of housing markets in Europe and the United States.

Ingvar Kamprad – who set up the business in 1943 when he was just 17 and now acts as an adviser to the firm – said Ikea had been too focused on expansion and had been "too lax" in dealing with its existing stores.

He said it was disappointing to lose staff from some stores, but said the group would still be hiring thousands of workers for new sites, although expansion would be scaled back.

"It will be necessary to do significantly more on the staff side. We need to cut staff more, mainly within manufacturing and logistics," he said.

"This is about adapting to sales being far below budget, as well as becoming more efficient. The forecast shows the margin and earnings falling considerably this year. That is proof that we've been too lax in dealing with our existing stores."

Kamprad, 83, added: "I've actually tried to warn for some time we've had too much focus on expansion and now the board has chosen to reduce the pace of new establishments significantly."

A spokeswoman for Ikea yesterday confirmed job cuts would be made, but gave no details of how many staff members or in which locations.

Last month Ikea – best known for its simple flat-pack furniture – halted its expansion into Russia, where the company has about a dozen existing stores and had plans to build up to 30 further outlets.

In the UK, furniture and DIY retailers – including Ikea's rivals B&Q and Homebase – have been hit by the collapse of the property market and subsequent fall in consumer spending during the recession.

A spokesman said the group this year still planned to open a store in Dublin and was on the lookout for further sites in the UK and Ireland.

Ikea has 299 stores in 36 countries; 265 of these, in 24 countries, are owned by the group itself and the rest are operated as franchises. The group has 19 stores in the UK, including sites in Edinburgh and Glasgow.

The spokesman for Ikea UK added: "Ingvar has been talking about the Ikea business from a global perspective. The UK was one of the first economies to feel the affect of the global downturn, and recently Ikea UK has taken steps to adjust to tougher trading conditions.

"All parts of the Ikea UK business continue to look at ways to become more efficient."

Andrew Oswald, professor of economics at Warwick University, said: "This is a sign of how bad the recession is. Ikea is caught in a pincer effect from the dropping housing market and the lack of credit in the British economy and elsewhere.

"There's nothing they can do to escape, because they're so dependent on housing and that's still dropping fast."