IKEA’S in­vest­ments im­prove on­line of­fer­ing

The Gulf Today - Business - - INTERNATIONAL -

STOCK­HOLM: IKEA Group said large in­vest­ments in im­prov­ing its on­line of­fer­ing, de­liv­ery ser­vices and in open­ing new smaller city cen­tre stores to meet chang­ing shopping habits pulled its full-year prof­its down 26 per cent.

The world’s big­gest fur­ni­ture re­tailer is known for its vast self­ser­vice out-of-town stores but is trans­form­ing its busi­ness model in the face of mount­ing com­pe­ti­tion, in­creas­ing ur­ban­i­sa­tion, and more de­mand­ing con­sumers who’d rather or­der fur­ni­ture on­line to their door then trekking to the city limits.

IKEA is also de­vel­op­ing faster and cheaper de­liv­ery ser­vices and as­sem­bly ser­vices as shop­pers be­come less keen on DIY. Its new city cen­tre for­mats in­clude a ded­i­cated kitchen show­room in Stock­holm, a Lon­don store of­fer­ing per­son­alised plan­ning for home ren­o­va­tions, and one for liv­ing room fur­ni­ture in Madrid.

Fur­ther planned full-range showroms in­clude one in Paris in 2019, and one in Tokyo in 2020.

“There is a fast-mov­ing re­tail land­scape across the globe, and that’s why we are now tak­ing th­ese big in­vest­ments,” Chief Fi­nan­cial Of­fi­cer Ju­ven­cio Maeztu told Reuters.

IKEA Group, which owns most IKEA stores world-wide, said it in­vested 2.8 bil­lion euros in to­tal in stores, distri­bu­tion net­works, shopping cen­tres, re­new­able en­ergy and forestry in the fis­cal year to the end of Au­gust.

The scale of the in­vest­ment led to a drop in op­er­at­ing profit to 2.25 bil­lion euros ($2.54 bil­lion), de­spite nearly 5 per cent growth in re­tail sales.

Maeztu said the sales growth was “not bad” con­sid­er­ing IKEA had mainly been a brick-and-mor­tar re­tailer in the past.

He added in­vest­ments in the cur­rent fis­cal year would be even higher, and then flat­ten out in the fol­low­ing year.

Prof­its in the com­ing couple of years would be roughly un­changed, he pre­dicted, with sales growth com­pen­sat­ing for the higher in­vest­ment lev­els.

IKEA Group in the year saw a nearly 50 per cent jump in on­line sales.

As­so­ci­ated Press

Cus­tomers at an out­let of IKEA in War­saw, Poland.

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