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Ikea Sees ‘Positive Signs’ as Economies Start to Recover

Ikea Store
A shopping trolley is wheeled through Ikea Group's store in the suburb of Tempe in Sydney. Photographer: Sergio Dionisio/Bloomberg

Jan. 28 (Bloomberg) -- Ikea Group, the world’s biggest furniture retailer, said household consumption is recovering in several markets including the U.S. and Europe.

“It’s too early to say the difficult economic situation is over, but there are positive signs,” Chief Executive Officer Peter Agnefjaell said in a statement after the company known for its flat-pack furniture reported a gain in annual profit.

“Consumers have more confidence, they have started to buy more and open their wallets more,” Agnefjaell said today at a press conference at the Kungens Kurva store outside Stockholm.

Ikea’s comments add to recent signs that shoppers are becoming more optimistic in response to improving economies. Euro-area consumer confidence increased more than economists forecast in January, according to figures released last week.

To capitalize on improving conditions, Ikea plans to widen the range of services it offers customers, Agnefjaell said.

“In big cities, people have more money in their wallets, but less time and want help with home delivery, assembly and installation,” Agnefjaell said in an interview.

Ikea needs to make consumers more aware of what is on offer as most don’t know about the services, he said.

The retailer, which has built its business on a reputation for low prices, will also expand in e-commerce as it seeks to meet a goal of doubling sales by 2020, the CEO said.

Website Visits

A total of 1.3 billion visits were made to Ikea’s website in the year through August, up from 1.1 billion a year earlier. The number of store visits fell to 684 million from 690 million.

The retailer increased the number of markets where it does business online to 13 from 10 last year and will continue to add more and expand the number of products available.

“E-commerce is becoming more and more important and it’s growing faster than the sales in our stores,” Agnefjaell said.

Ikea said net income increased 3.1 percent to 3.3 billion euros ($4.5 billion) in the year ended Aug. 31.

Its gross margin increased by 1.5 percent to 43.3 percent helped by improved supply-chain efficiency, it said. Average product prices were reduced by 0.2 percent.

“We still see room for growth even in the most mature Ikea markets,” Agnefjaell said while presenting the results to the press in a grey Ikea kitchen.

Not all retailers are seeing improved market conditions. Carpetright Plc, the U.K.’s largest floorcoverings seller, today predicted that underlying pretax profit for the year would miss analyst estimates because of a deterioration in the Netherlands.

Renewable Energy

For the fiscal year 2014, Ikea Group plans to invest 2.5 billion euros in stores, factories, renewable energy and shopping centers, up from 1.9 billion euros a year earlier.

The retailer also said it has allocated 1.5 billion euros for investments in renewable energy until 2015, and plans to spend the money on solar panels at its stores or wind turbines around the world.

Ikea Group owned 303 stores in 26 countries at Aug. 31. The company said Oct. 14 that its full-year sales rose 3.1 percent to 27.9 billion euros helped by growth in Russia and China.

To contact the reporter on this story: Katarina Gustafsson in Stockholm at kgustafsson@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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