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IKEA's Profits Drop More Than a Third Amid Store And Ecommerce Investments

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Ingka, the company that operates most of IKEA's retail stores, has reported a 36% decline in pre-tax profits, following heavy investment into its online business and smaller stores.

For the year ended 31st August 2018, profits dropped to €2.1bn (£1.8bn) while group sales rose by 2% to €37bn (£32.8bn).

IKEA's stores are operated by 11 franchisees, including Ingka, which owns 367 stores. Ingka's retail segment reported a 4.7% rise in sales and a 45% rise in online sales,  

Twelve new stores were opened during the reporting period, including its first Indian branch which finally opened in early August after several delays.

During the reporting period, Ingka invested €2.8bn.  Investments included 14 distribution centres for online fulfilment; the acquisition of TaskRabbit, an on-demand services platform; two windfarms (Finland and Portugal), and forests in the US and Latvia.

Deputy chief executive and chief financial officer of Ingka, Juvencio Maeztu, said: “During the year we have increased our efforts and investments to start to transform our business.

“While this has had an impact on our results, it is a conscious decision for us to start a three-year period to transform our business and be better equipped for the next 75 years.

“Our financial strength enables us to invest over the long term, and with purpose, in our own future.”

“It’s a conscious decision to lower the profit to finance the business transformation (and) we expect to keep the same level of profit for the next three years. We are in a four-year process to transform the company”.

“We have been operating for 75 years with the same business model. From 2018-22, we have a big programme to change the company, to be ready for the next 75 years. We are investing like never before.” 

The news comes a week after IKEA announced the next step in its business transformation, which included plans to remove 7,500 jobs worldwide, 350 of which will be in the UK. 

In a statement, IKEA (Ingka Holding B.V and its controlled entities) said it was: "...accelerating its transformation, stepping up investments in new and existing IKEA stores and fulfilment centres, developing city centre formats and focusing on its e-commerce platform, to better meet the needs of its customers and be more convenient and affordable to many more people".

Source : Insight DIY Team

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30 November 2018

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