STOCKHOLM (Reuters) – Profits at the IKEA furniture brand’s owner grew in the 12 months through August as shoppers kept at home by the pandemic spent money saved by not going on holiday on furnishing, and September and October sales rose.
Inter IKEA Group, a franchisor to store owners, said on Tuesday its pretax profit grew 13% to 2.0 billion euros ($2.4 billion), helped also by lower raw material prices. In the previous fiscal year, profit growth was 5%.
The company, which generates the bulk of revenues from sales of goods to its franchisees, said in September retailers’ sales shrank 4% to 39.6 billion euros because of COVID-19 and temporary store closures, but it saw sales growing this year.
Inter IKEA Chief Financial Officer Martin van Dam told Reuters that sales in September and October had risen year-on-year, after “a fantastic pick-up” in the June-August period.
Demand grew early on in the pandemic for office furniture, food jars and cooking products, and has stayed strong for storage.
“We also see that, with lockdowns dragging on and the crisis expanding, people started doing things such as getting new beds for the kids, or refurbishing the kitchen … now that they didn’t go on holiday and had some money to spare,” van Dam said.
Van Dam said the company was increasing production to meet the higher demand for such products and to replenish stocks. Inventories were 15% lower at the end of August than a year earlier due to supply chain disturbances and the later pick-up in demand.
Improving the availability of goods for retailers would be a focus for the coming months. “We need to make sure that we supply retailers with enough products,” van Dam said in an interview.
Three out of four stores closed during the early stages of the pandemic. Now every tenth store has closed again as new measures to slow a second wave take effect.
IKEA is better prepared for the second wave than for the first, having acquired experience and rolled out click-and-collect to more markets to cater for a rapidly growing number of online shoppers, van Dam said.
“I expect a drop in sales (during new closures) but I don’t expect a full fall on the floor like the one we had in the first wave,” he said.
He said a decline in impulse buying was continuing as shoppers browse less online as well as in stores.
“The fun shopping is out of shopping. Everybody comes very purposely into an IKEA store, or they click very purposely for a certain type of furniture, that they really want.”
Reporting by Anna Ringstrom; editing by Louise Heavens and Barbara Lewis