Investments hit Ikea as annual profit plunges

[STOCKHOLM] Ingka Group, the parent group of Swedish furniture giant Ikea, reported on Wednesday a 40 per cent drop in annual net profit citing major investments in online stores and its foray into city centres.

For its fiscal year September 2017-August 2018, Ingka Group registered a two-per cent increase in sales to 37 billion euros (S$12.4 billion).

But net profit tumbled by 40.6 percent to 1.47 billion euros, while operating profit shrank by 25.7 per cent for the group which operates 367 Ikea stores worldwide,

"Ingka Group invested 2.8 billion euros in stores, distribution and customer fulfilment networks, shopping centres, renewable energy and forestry," it said in its report.

The Swedish company also plans to accelerates its investments in stores in city centres, a strategy aimed at accommodating changing lifestyles as fewer people own cars.

Ikea opened smaller city stores in Stockholm and Madrid in 2018, as well as a planning studio for kitchens and bedrooms in London. A store is also set to open in central Paris in mid-2019.

Ingka said customer visits to its stores increased by three per cent to 838 million in 30 countries.

Online sales meanwhile jumped by 45 per cent from a year earlier.

Ingka announced last week that it planned to cut 7,500 Ikea jobs worldwide by 2020, mainly office jobs, as it reorganises to focus on e-commerce and city stores.

AFP