Ikea, the world's biggest furniture retailer, expects a rise in European revenues to continue this financial year, with its focus on low prices helping it to cope in a struggling economy.
The privately-held Swedish company, which makes almost 70 per cent of sales in Europe, said on Wednesday demand in previously crisis-hit countries such as Portugal, Spain and Italy had picked up in its financial year ending August 2014.
"We've seen a strengthening situation where consumer spending continues to increase, more people visiting the stores and buying more home furniture," said chief executive Peter Agnefjall.
“We don’t see any indication that that trend should change as we speak,” he said.
Mr Agnefjall said Ikea, known for its flat-pack, self-assembly furniture, did not fear deflation because its business model was focused on keeping prices down.
Lower purchasing and transport costs helped it to reduce prices by an average of 1 per cent in 2013-14.
However, a weak Europe remains a challenge for a group aiming to grow sales to €50 billion by 2020, which would require an increase of 9-10 per cent a year - well ahead of the current growth rate.
Mr Agnefjall said that goal was a “guiding rail” rather than a “target hammered in stone”.
Ikea, which has 222 of its 315 stores in Europe, had previously said sales rose 5.9 per cent in 2013-14 to €28.7 billion, with stores open a year or more accounting for 3.6 per cent.
It said on Wednesday that, with rental income from its shopping centres, total revenue was €29.3 billion, a 2.8 per cent increase. It did not give a separate figure for Europe.
Net profit was flat at €3.3 billion, held back by a €200 million contribution to an employee loyalty programme and more staff taking part in a bonus programme.
Ikea, whose biggest single markets are Germany, the US and France, said it grew share in almost all of its 27 territories. China, Russia and Hungary were the fastest growing.
Having opened 12 stores in 2013-14, Ikea is likely to expand at a similar rate this financial year, with a first opening in India a possibility, Mr Agnefjall said.
“We had 716 million visits to our stores (in 2013-14) but there are 7.2 billion living on this planet, so Ikea is just at the beginning,” he said.
Reuters
