Ikea sees sales build up in Europe as profit jumps

Consumer spending is on the rebound, the head of Ikea said yesterday as the world’s largest furniture retailer unveiled record profits.

Ikea president Peter Agnefjall said European markets were showing signs of recovery
Ikea president Peter Agnefjall said European markets were showing signs of recovery
Ikea president Peter Agnefjall said European markets were showing signs of recovery

The iconic Swedish retailer was boosted by strong sales growth in China, Russia and the United States but company president Peter Agnefjall also hailed improvements elsewhere.

He said business in southern Europe, where many economies are still reeling from the financial crisis, was now “showing signs of activity”.

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“Europe in general is starting to recover,” Agnefjall noted. The privately-owned firm, which has just over 300 outlets worldwide, does about 70 per cent of its trade in Europe.

The group posted a net profit of €3.3 billion (£2.7bn) for the 12 months to the end of August, up 3.1 per cent on a year earlier.

Previously published figures showed that global sales hit €27.9bn during the year, also a rise of 3.1 per cent, or 1.8 per cent on a like-for-like basis, stripping out store openings and additional selling space. It yesterday reiterated its goal of making €50bn in annual sales by 2020.

The firm said it planned to invest some €2.5bn in the current financial year in stores, factories, renewable energy and shopping centres.

Agnefjall said: “By creating better products at lower prices, being more inspiring, improving our existing stores, opening new stores and expanding our e-commerce offer, we plan to double sales by 2020.”

Growth will mainly be in existing markets – in China it has opened 11 stores in a decade, but also in new markets such as India, where the firm plans to cash in on demand from an increasingly affluent middle class.

After gaining approval from the Indian government, Ikea is now looking at sites for its first store there.

While the group ranks as the biggest seller of furniture globally, by sales, it faces increased competition. The company has also been relatively slow to embrace the internet, selling online in half of its 26 markets.

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Companies such as German outfit Home24 are betting that shoppers will increasingly look online for furniture as they are doing in growing numbers for products like fashion, electronic goods and food. Ikea is aiming for online availability in all its markets, but has not said when it will achieve that. It has also not disclosed the percentage of its sales generated via the web.

Research firm Euromonitor forecasts global e-commerce sales of home furnishings will grow to some £14.5bn by 2015 from about £12bn last year.

Ikea’s stores attracted 680 million customer visits during the year and the group employs some 135,000 people.

• Carpetright has warned over profits for the second time in less than four months after dire trading in its Netherlands business offset a UK sales rebound.

The firm saw UK like-for-like sales bounce back with a 1.9 per cent rise in its third quarter to 25 January.