IKEA has warned of imminent price increases, as it revealed its financial results for FY21 (to 31st August 2021).
The group states that economic recovery continued during the financial year, but that business remains "extremely challenging". More than 150 IKEA stores were closed due to local lockdowns, resulting in lower store sales – yet ecommerce sales grew +73%, and IKEA franchisees’ total retail sales reached €41.9b (+5.8% YoY). FY21 sales also surpassed FY19's (€41.3b).
The pandemic also disrupted global transport, even as demand went up. As a result, many IKEA products sold out, while transport and labour shortages drove higher raw material prices. To mitigate these disruptions, Inter IKEA Group spent an additional €250m in FY21.
“This year, IKEA ecommerce accelerated and now accounts for 26% of total retail sales. But stores welcomed only 775 million visitors compared to more than one billion in FY19. To keep products affordable and meet changing customer needs, we’ve invested heavily in the IKEA supply chain,” says Inter IKEA Group CFO, Martin van Dam.
Doing so led to lower financial results for the group, says Martin. Net profit amounted to €1.4b in FY21, compared to €1.7b in FY20.
“Raw material shortages and the global transport crisis have impacted Inter IKEA Group margins," Martin continues. "Although our costs increased, we did our utmost by keeping the prices to our retailers stable in FY21. 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 during FY22.”
The group continued to invest in product development, initiatives to reduce IKEA's climate footprint, and expansion, including further development of new store formats. Around 45 new IKEA locations (including tests) opened in FY21, including the first stores in Mexico and Slovenia. Franchisees also started ecommerce operations in the Philippines.
IKEA is striving towards 100% renewable energy throughout the entire value chain. To move closer to this ambition, Inter IKEA Group launched a programme for nearly 1600 direct suppliers to accelerate their transition to 100% renewable electricity. Today, nearly 90% of IKEA Industry (owned by Inter IKEA Group) is already powered by renewable energy.
“Despite the challenges, Inter IKEA Group continues to invest in the IKEA franchise system and value chain to create a more affordable, accessible and sustainable IKEA for the many people,” concludes Martin.