Ikea has tried to take an alternative approach to inflation, absorbing costs rather than passing them on to customers and cutting prices twice this year as a collective. 2,000 million euros.
This probably won many loyal Ikea shoppers to the Swedish online retailer and as the store gained traction, it must have hurt the company financially.
Ingka Group, Ikea’s parent company that manages most of its stores, saw its net profit fall by 47% to 800 million euros. That’s one of the retailer’s biggest drops in a decade. Its income also fell by 5%, Ingka reported on wednesday.
Unfortunately for Ikea, thanks to the re-election of Donald Trump, these cost pressures may not disappear until enough time passes or the economy recovers.
Before Ikea opened its pop-up store on London’s Oxford Street, Ingka Group CEO Jesper Brodin said he was concerned about how Trump’s proposed trade tariffs could affect Ikea’s international operations.
“Tariffs make it harder for us to keep prices low and make it affordable for a lot of people, which is ultimately our goal,” Brodin said. CNN on wednesday.
“We’ve never had a good period when we had high tariffs,” he added, referring to Ikea and the global economy.
Trump has promised an additional 10% tariff on China and higher charges elsewhere in the world. His plan for Europe is unclear, although the incoming US president has vowed to pay Europe back.great price” last month.
Ikea sources around 70% of its products from Europe, with the rest being made in Asia. Therefore, any tariffs will hurt businesses that operate internationally, whose fears have increased in recent weeks following Trump’s election victory.
Ikea has made a deep push to cut prices at a time when most companies were raising prices to meet rising costs. The Swedish mega-retailer made this a priority as it put customer pride ahead of financial gain.
“For us, it has never been more important to stand up for many people,” said Juvencio Maeztu, Deputy Director and General Manager of Ingka Group, in a statement.
But the tariffs could force Ikea to review how it has maintained its prices. While Ikea did not say whether it would move production or raise prices in response to the tariffs, Brodin said there was a real possibility the move would “end up on customers’ bills.”
“We will always work to maintain the low prices that are the basis of IKEA’s vision. In our general experience in the 31 markets where we work, the tariffs make these intentions difficult,” said a spokesperson for the Ingka Group. luck.
