Business

IKEA gets sales boost from shoppers’ new stay-at-home focus

IKEA sees sales returning to growth this year after the coronavirus crisis boosted shoppers’ interest in spending more on their homes, a trend the world’s biggest furniture retailer believes is here to stay.

IKEA is shifting focus from its traditional large out-of-town stores towards e-commerce and smaller inner-city formats as it adapts to the growth of online retailing and new shopping habits.

Jon Abrahamsson Ring, an IKEA veteran who became CEO of brand owner and franchisor Inter IKEA in March, said that, including test formats stores, some 50 new stores would open in the current year, against around 30 in 2019/20. Most of IKEA’s new stores are in inner-cities.

Retail sales – sales of products and services at the 445 IKEA stores and online – shrank 4% in the year through August, to 39.6 billion euros ($46.7 billion).

Abrahamsson Ring said retail sales at comparable stores shrank 10% against a 1% rise the year before. Adjusted for the temporary closures, however, comparable sales were unchanged.

He said the full-year sales were higher than he had feared at the height of the crisis, and predicted a return to growth in the current year. “We feel very strongly that this interest in your home, how you live at home and create an even better home, is here to stay.”

He said demand for IKEA’s lowest-priced ranges had grown during the crisis to make up 60% of sales in May-August, against around 45% usually. “Low prices has become super relevant in this period with the uncertainty.”

E-commerce jumped 45% to account for 15% of total retail sales. Inter IKEA said online sales remained high even after stores, most of which closed temporarily for an average of four weeks early in the pandemic, re-opened.

Ingka Group, the main IKEA franchisee, said sales at its 378 stores shrank 4%, to 35.2 billion euros, with online sales soaring 60% to make up 18% of its total turnover.

Ingka’s CEO Jesper Brodin said that in recent weeks, the retailer’s sales were up 7-8% year-on-year.

“Corona has without doubt impacted the interest in life at home. But it’s to a degree that we hadn’t really expected,” he said.

He said early in the crisis demand was focused on primarily on office and cooking products but now demand was now up across the range.

“We don’t think the strength of the interest in life at home was a pent-up need. Had that been the case we’d have seen a slowdown many weeks ago.”