Price increases on the horizon at Ikea

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Inter Ikea Group, the owner of the Swedish furniture brand, is going to raise its prices. The company saw profit fall last year due to higher transportation and raw material costs and expects supply issues to continue well into 2022.

 

Lower profit

Despite record-breaking sales due to people spending more time at home because of the pandemic, pre-tax profit of the Inter Ikea Group - the franchisor of the stores and responsible for supplies - fell by 16 per cent to 1.71 billion euros in the 12 months leading up to August. Compared to the fiscal year 2019, i.e. pre-Covid, profit shrank by 4 per cent, Reuters reports. Inter Ikea points to the sharp rise in transportation and raw material prices as the main cause of the drop in profit.

 

"Keeping IKEA stores and warehouses stocked has been a challenge. Supply chain disruptions led to a substantial drop in the availability of products that we have yet to recover from. We expect this will continue far into the financial year 2022", the company said yesterday.

 

Room to manoeuvre  

Chief Financial Officer Martin van Dam expects the 2022 fiscal year to be challenging with more difficulties. "The scarcity and pricing of raw materials, and then the logistical problems - that means it will be difficult to grow in 2022."

 

The CFO also thinks that supply-related costs will rise further. Until now, Inter Ikea has kept product prices stable for franchisees, but this year the higher costs will be passed on, at least partly: "Though we can't continue to secure fixed prices to the retailers under these challenging conditions, we also plan to absorb part of the increased costs." According to Van Dam, this will give retailers some leeway to decide whether, and to what extent, to pass on the increased prices to customers.