IKEA owner’s profit growth accelerates as consumers spend more on home improvement

Customers walk to a reopened IKEA store in London on June 1, 2020.

John Sibley/Reuters

The owner of furniture brand IKEA accelerated profit growth in the 12 months through August as shoppers kept at home by the pandemic spent more on furnishing, and as lower wood prices helped to boost margins.

Inter IKEA Group, a franchisor to store owners, said on Tuesday its pretax profit grew 13 per cent to 2.02 billion euros ($2.36 billion). In the previous fiscal year, profit growth was 5 per cent.

The company, which generates the bulk of revenues from sales of goods to its franchisees, said in September their sales shrank 4 per cent in the year to 39.6 billion euros because of COVID-19 and temporary store closures, although demand picked up after they re-opened.

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Inter IKEA Chief Financial Officer Martin van Dam told Reuters that sales in September and October had remained strong, rising year-on-year, after “a fantastic pick-up” in the June-August period.

Inventories were lower as the pandemic disrupted supplies and shipping and because of the later pick-up in demand. At the end of August, they were 15 per cent down from a year earlier.

van Dam said in an interview improving the availability of goods for retailers following supply chain disturbances would be Inter IKEA’s focus in the coming months.

“We need to make sure that we supply retailers with enough products for them to be successful,” he said.

Inter IKEA produces about a tenth of goods and buys the rest from suppliers.

Three out of four IKEA stores closed temporarily for seven weeks on average during the early stages of the pandemic.

About 10 per cent of stores have closed again following new government measures to slow a second wave.

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