Swedish retail giants differ over Europe sales boost

London: Two of Europe’s top retailers offered conflicting views on the strength of the continent’s consumer recovery.

Peter Agnefjall, Ikea’s chief executive, told the Financial Times that growth last year was strongest in China, Russia and Hungary for the world’s largest furniture retailer by sales, but that southern European countries had seen healthy increases as well.

“The former struggling [countries] that were so visible in southern Europe: Portugal was first out with double-digit growth, followed by Spain and Italy, with France lagging behind a bit. That trend is continuing,” he added.

But Karl-Johan Persson, chief executive of Hennes & Mauritz, the world’s second-largest fashion retailer by sales, said there was increasing uncertainty in Europe after weak figures for the clothing market in countries such as Germany, the Netherlands and Austria at the end of last year.

“It is uncertain — it is not boom times, but it is not super bad either. It’s a bit shaky and uncertain,” he added.

Privately owned Ikea and listed H&M are two of Sweden’s biggest companies by revenues, and both have reported strong full-year results.

The flatpack furniture maker said its net earnings were flat at €3.3 billion (Dh13.64 billion), only due to it paying out €300 million in loyalty and bonus payments to its 147,000 workers. Sales in local currencies increased 5.9 per cent to a record €28.7 billion, while its like-for-like growth — which strips out the effects from new stores — rose 3.7 per cent.

H&M’s net profit rose 17 per cent to SKr20 billion ($2.44 billion; Dh8.8 billion) last year, while sales in local currencies increased 14 per cent to SKr151 billion. But it warned that the rising dollar would hurt margins by increased purchasing costs.

Both companies are building many new stores around the world and increasing their online offering to boost growth. Ikea opened 12 stores last year, including two each in China, Germany and Japan, and is hoping to open as many as 25 stores in India in the coming years.

Agnefjall said he expected half of the growth in its €50 billion sales target to come from expansion and ecommerce, with online revenues having increased 40 per cent last year in the 13 countries where it has web sales.

H&M intends to open 400 shops this year, up from 379 in 2014. China and the US will see the most openings, but the purveyor of cheap chic will also go into new countries such as India, South Africa, Peru and Taiwan.

One of Ikea’s biggest markets is Russia, where the retailer was recently forced to raise prices due to the plunge in the value of the rouble. Agnefjall said the move was a “kind of counter-culture” for the retailer, which is famed for its relentless cost squeezing, with average global selling prices falling 1 per cent last year.

He added that Ikea was monitoring the geopolitical and currency situation, but noted the strong development in sales in Russia. “We are in Russia to stay. The many consumers in Russia seem to like us,” he added.

Ikea has also been in the headlines after its sister company, Inter Ikea, to which the retailer pays royalties for the use of its brand name, was one of the groups caught up in revelations concerning tax rulings granted by Luxembourg to a series of large companies.

Agnefjall underlined that Ikea paid 800 million euros in corporate tax last year — equivalent to an 18 per cent rate — as well as €700 million in other taxes.

“Obviously Ikea should pay taxes according to all laws and regulations that are in place in the different countries. What we see is that this is probably not enough,” he said. He added that Ikea needed to be “a good corporate citizen” as part of its sustainability agenda.

— Financial Times