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IKEA sees consumer recovery worldwide, posts record profit

2014.04.03


World No. 1 furniture maker IKEA Group said it saw signs that consumer spending was starting to recover in many of its markets and posted record full year profits on Tuesday.

Retailers have been struggling, particularly in Europe, where IKEA generates nearly 70% of its sales, as the global economic downturn and austerity measures, mostly in euro zone countries, hurts consumer sentiment and spending power.

IKEA, whose warehouse-like stores sell everything from highchairs to fitted kitchens, posted a net profit of 3.3 billion euros (RM15 billion) in the 12 months through August 2013, up 3.1% on a year earlier.

"Consumer spending is improving in many countries," IKEA CEO Peter Agnefjall said in a statement. "While the challenging economic situation may not be over, there are positive signs."

IKEA said it had seen strong growth in China, where it opened two new stores, as well as in Russia and the United States.

Southern Europe, still suffering from the effects of the downturn, was showing some positive signs, but sales fell in Spain and Italy, the company said.

Figures published in October showed that while sales at IKEA rose 3.1% to 27.9 billion euros (RM127.4 billion) in the 2013 financial year, sales in comparable stores grew by 1.8%.

The company said it planned to invest 2.5 billion euros (RM11.4 billion) this fiscal year in stores, factories, renewable energy and shopping centres.

"By creating better products at lower prices, being more inspiring, improving our existing stores, opening new stores and expanding our e-commerce offer, we plan to double sales by 2020," Agnefjall said.

Growth will mainly be in existing markets (in China it has opened 11 stores in a decade), but also in new markets such as India, where it plans to cash in on demand from a growing urban middle class. After getting approval from the Indian government, IKEA is now looking at sites for its first store.

While IKEA enjoys instant brand recognition - the company claims that with a publication run of 212 million copies last year in 29 languages, its catalogue is the second most read publication after the Bible - it faces increased competition.

Companies such as German firm Home24, for example, are betting shoppers will increasingly look online for furniture as they are doing in growing numbers for products like fashion and food.

While IKEA sells online in half its 26 markets, it has been slow to embrace the Internet.

The Swedish group is aiming for online availability in all its markets, but does not say when it will achieve that. Neither will it say what percentage of its sales come via the Internet.

Research firm Euromonitor forecasts global e-commerce sales of home furnishings will grow almost 10% a year to US$24 billion (RM80.1 billion) by 2015 from US$20 billion (RM66.7 billion) in 2013.

IKEA's more than 300 stores in 26 countries, attracted about 680 million people during the year. It employs 135,000 people.


source: the malaysian insider

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