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Ikea’s profits have fallen nearly 10% as the world’s largest furniture retailer stepped up its spending on renewable energy and its growing online operation.
Ingka Group, the holding company that runs the majority of Ikea stores, said operating profit fell to €2bn (£1.7bn) in the year to the end of August despite a 5.3% rise in revenue to €39.1bn. Pretax profits for the business, which also includes an investment arm and TaskRabbit, the odd-job gig economy app, rose 19% to €2.5bn as a result of a surge in income from financial investments.
The company, which employs 166,000 staff at 374 Ikea stores in 30 countries, said it was “a challenging time for retail” but that sales continued to rise at its existing stores, smaller city stores and online.
Sales at established stores rose 0.7% while online sales were up nearly 50%, to account for more than 10% of total retail sales. The company has previously reported that UK sales rose 8% to £2.1bn in the year largely thanks to a surge in online business.
Juvencio Maeztu, Ingka Group’s deputy chief executive, said Ikea would aim to accelerate sales growth by opening more city-centre stores and aim to cut costs by investment in new technology and ways of working with sustainability in mind.
Last year, the group said it was cutting 7,500 office jobs worldwide, including 350 in the UK, to focus on improving its online operation and city-centre format.
But Ingka, which is one of 12 franchise groups that operate under deals with the brand’s owner, Inter IKEA Systems, has also invested in wind and solar power, which it says will keep costs down longer term.
Since 2009 Ikea has pumped close to €2.5bn into renewable energy so that it now owns 534 wind turbines and 715,000 solar panels in 14 countries as well as a further 920,000 solar panels on store rooftops. The company said it was on track to produce as much energy from renewable sources as consumed in its operations by next year.
Maeztu said: “We want to be a part of creating solutions for the challenges our planet is facing, and we are taking bold steps securing our ambition to become climate positive by 2030. It is even clearer that financial performance and sustainability go hand in hand, and for us this is how we will grow, stay relevant and remain profitable, long term.”
He said the financial performance for this financial year is in line with plans.
“We will continue to test and try new things. At times we will fail and that’s OK, as that’s part of how we constantly develop and improve our business to better meet the needs of our customers for many years to come,” Maeztu said.
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