Ikea’s owner has warned of spiralling profits and price hikes because of supply chain disruption.
Higher raw material costs have contributed to the furniture giant forecasting its profits are set to fall for two successive years.
Net profit in the year to the end of August fell 17 per cent to €1.4bn at Inter Ikea despite online and in-store sales soaring six per cent to a record €41.9bn.
“For the 2022 financial year, we’re looking at supply disruptions still, we’re looking at raw material increases still, we’re looking at energy increases still,” Martin van Dam, Inter Ikea’s chief financial officer, told the Financial Times.
The current financial year – to August 2022 – would not be easier than the previous, van Dam warned. “It will be more difficult . . . it eats away our margins in a massive way.”
Hikes would be a bitter pill for the retailer, which prides itself on its affordable prices.
The company has not increased prices since 2019 and it is anticipated the increases will be higher than the pre-Covid rise.
However, van Dam stressed to the FT that hikes did not necessarily mean increases for customers. It depends how much retailers including the Ingka Group, the main Ikea franchisee, pass on and how much they absorb.
Van Dam added: “We really want to stay as low-priced as possible. We can’t let this period of time make us different.”
“We want to absorb as much as possible these price increases. But there comes a moment in time that it becomes impossible for us to hold it back any more. It’s something we don’t like,” he added.
The retailer currently has such “little availability” among products that it was letting down customers and restricting its growth, the CFO warned.