Ikea’s profits in the UK fell by almost a fifth, and despite a 12% rise in sales hit by soaring costs, the company said it would not rule out further price hikes in the new year.
The world’s largest furniture retailer said sales benefited as shoppers returned to stores in the year ended Aug. 31, while online revenue as a percentage of annual sales fell to 35% from a year earlier. 45%, when epidemic restrictions drove online shopping.
The Swedish retailer is doing well as shoppers continue to look for more work-from-home kits, while store reopenings lead to more impromptu buying.
Total sales rose to £2.2bn, surpassing pre-pandemic levels for the first time. However, operating profit slipped to just under £50m from more than £61m a year ago due to higher energy bills, higher supplier prices and higher freight costs. IKEA said that despite price increases this summer, profit margins have also been hit by not passing the full impact of higher costs on to shoppers.
IKEA UK national retail manager Peter Jelkeby said its supply chain had been stabilizing and service levels were improving, but “inflation is not over for us”. While raising prices for shoppers could not be ruled out, he said: “We have to be competitive and affordable and we are working hard to increase our offers.”
He said shoppers were looking for ways to save money and electricity, with people buying insulated curtains, water-efficient taps and energy-efficient light bulbs.
The company is trying to cut costs and trade more sustainably by reducing waste, reducing food waste by 50% and is switching to electric vehicles for home deliveries. The group already has 24 electric vans in operation and will convert all home deliveries to electric or other zero-emissions options by 2025.
Jelkeby said IKEA will also expand its furniture buyback program, which is now running in all stores and has resulted in 28,000 items being returned.
IKEA is also trying to make it easier for shoppers to buy its products by opening three small “planning and ordering points” in Aintree, Preston and Stockport over Christmas and New Years, and is testing online collection lockers in seven Tesco car parks as A part or its effort is more attainable. Three more Tesco sites are in the pipeline.
The latest small store opening comes after IKEA opened a UK high street store in Hammersmith, west London this year, and announced plans to open an outlet at the former Topshop store in London’s Oxford Street next autumn.
The company is also spending £33m on a new distribution center for its online business, which will open in Dartford, Kent, next May.