Ikea, the flat-pack furniture giant, said it had no choice but to hike prices earlier this year as inflation soared, ending a policy of stability over of recent years.
“It hurts my soul that we had to raise prices,” Chairman and CEO Jon Abrahamsson Ring of Inter Ikea Group, the brand’s global franchisor, said in an interview. “Unfortunately, we cannot ignore soaring raw materials and transportation costs.”
Inter Ikea absorbed more than one billion euros ($974,200) in costs over the past two years rather than passing them on, “but it just wasn’t enough,” the CEO said. He added that Inter Ikea was now lowering the prices of certain products when possible given the growing cost of living crisis. Revenue rose 6.5% to 44.6 billion euros, the company announced on Thursday.
Although Ikea reached another sales record, the rise was mainly due to higher prices, as the volume of goods sold remained stable amid low availability following supply chain issues. The current cost of living crisis is affecting demand from retailers around the world as consumers cut back on non-essential spending as food, fuel and energy bills rise. Supply shortages of items such as mugs and lamps, mainly from Asia, also held back volume growth.
Abrahamsson Ring said Ikea’s affordability is more important than ever as consumer confidence wanes amid growing fears of a global recession. Even with high inflation, the company is trying to keep prices as low as possible this year, the CEO said.
“We’re seeing our lower price range, which is about 50% of our range, currently performing better,” he said. “People are just looking for good prices.”
Along with inflation, Russia was one of the big challenges facing the group, which previously revealed it was winding down operations there, laying off thousands of staff.
Looking ahead, the CEO gave a cautiously optimistic outlook for this fiscal year, saying supply chain congestion and cost inflation will start to ease gradually. So far, sales are growing, although volume is still lagging, he said, but added that there is still strong potential for growth in Ikea’s 64 markets , particularly in Asia and its home market, Europe, where Ikea has a market share of 9% to 10% on average. .