Stockholm: Inter IKEA’s annual profit more than doubled as cost pressures eased, the owner of the world’s biggest furniture brand said on Friday, allowing it to cut prices and predict more reductions in the months ahead.
The company, which supplies the stores to which it franchises the brand, made a pretax profit of 1.95 billion euros ($2.07 billion) in the year through August, up from 931 million a year earlier when it struggled with high costs and the effects of closing its Russian factories.
Chief Financial Officer Martin Van Dam told Reuters that results were returning to normal after a disrupted 2022.
“We were trying to make sure the retailer had the right price, and with the delay of (higher) prices we ended up harbouring a lot of the costs that year. If you look at FY21, the returns are similar to now,” van Dam said.
“Costs trending downwards should positively affect prices for IKEA customers in the coming year and beyond,” it said in a statement.
While Inter IKEA started lowering prices to its franchisees in the last four months of its financial year, it would take some time before customers in stores would feel the full effect of the decreases, van Dam said.
Soaring inflation, which increased the cost of everything from wood to workers, and subdued consumer demand have made for a tough few years for Inter IKEA and store owners.
But while Inter IKEA has offset higher costs by raising prices since the pandemic, the brand has also seen cash-strapped customers who normally would have shopped elsewhere come to the budget furniture maker.
Van Dam said the brand hoped to retain those new shoppers, while price cuts could draw other customers back.
Globally, IKEA’s annual sales increased by 6.6 per cent to 47.6 billion euros.
Inter IKEA said its costs had continued to rise, before stabilising and then starting to fall at the end of the period.
An easing of supply chain disruptions also meant its inventory levels had decreased to 4.8 billion euros from 6.3 billion, as the company was able to ship more products to its 12 franchisees.
Main franchisee Ingka group will publish its annual earnings later in November.