Ikea Ireland pieces together 9% profit growth despite higher costs

Online sales now account for over half of Ikea’s Irish business, having more than doubled in the year to last August, according to accounts filed for the Swedish homeware giant’s Irish operations.

Ikea Ireland, the trading company behind the home furnishing giant’s Ballymun outlet and a smaller order and collect store in Carrickmines reported after-tax profits of more than €3.2 million in the year to the end of last August, up around 9 per cent from its previous financial year despite being forced to close its doors between January and May 2021.

Turnover at Ikea Ireland increased by around 8 per cent to almost €191 million from €176.6 million the year previous. Online sales represented more than half of that figure, the company’s directors noted in the accounts, up from around 24 per cent the previous year with its customers stuck at home for significant periods of time throughout the year.

This level of uptake had “accelerated the implementation of many of [its] transformational plans”, for example, the introduction of click and collect services and online order fulfilment, the directors said.

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Despite movement being restricted due to the pandemic, the company saw “huge appetite among [its] customers to upgrade their living space”, which drove the annual increase in sales.

The company paid out a dividend of €3 million during the year, while its staff costs increased slightly from €17.6 million in 2020 to €17.8 million. At the end of August 2021, Ikea Ireland employed 699 people, up from 695 in the previous year.

However, the company’s costs jumped by around 11.5 per cent amid the supply chain disruption caused by the pandemic. Ikea Ireland’s cost of sales topped €143 million, up from €128.5 million in 2020.

Last September, one month after the end of the period covered by the accounts, Ikea Ireland released a statement warning Irish customers that up to 10 per cent of its product lines were unavailable.

“Like many retailers, we are experiencing ongoing challenges with our supply chains due to Covid-19 and labour shortages, with transport, raw materials and sourcing all impacted,” it said.

“In addition, we are seeing higher customer demand as more people are spending more time at home,” the company said. “As a result, we are experiencing low availability in some of our ranges, with approximately 10 per cent unavailable.”

In anticipation of Britain’s withdrawal from the European Union, the company moved its Irish distribution chain from the UK to Belgium to maintain continuity of supply. The directors noted in the 2021 accounts, however, that the “central fulfilment of customer orders”, chiefly online orders, “is still done from the UK”.

Looking ahead, the directors noted that the risk of supply chain disruption as a consequence of the “recent outbreak of war between Russia and Ukraine” constituted one of the main risks to the business.

In March, Ikea’s parent company Ingka, also one of the world’s biggest shopping centre operators, closed down 17 Ikea shops in Russia in response to the invasion.

However, Ingka still operates 14 shopping centres in Russia and said in a statement last month that it hopes one day to bring Ikea back to the country but that the “preconditions are not in place”.

In the Irish accounts, Ikea Ireland’s directors said that “management is keeping close to the situation” and “working closely with external partners” to “make changes where required” and manage the disruption.