• IKEA reports a 5% drop in annual sales due to strategic price cuts aimed at attracting more customers.
• Despite the downturn, IKEA remains optimistic, forecasting a recovery in the coming year.
• The company's online sales have seen a positive trend, with the share of sales made online increasing to 28%.
• IKEA plans more price reductions for the 2025 financial year, expecting a boost in sales.

IKEA, the renowned Swedish budget homeware retailer, has reported a 5% drop in its annual sales. This downturn is a consequence of the company's strategic decision to reduce prices in an attempt to attract more customers and sustain its market share in the increasingly contracting home furniture market. Despite the downturn, the company remains optimistic, forecasting a recovery in the coming year.

The Ingka Group, the entity that owns the majority of IKEA stores worldwide, disclosed a sales figure of €39.6 billion ($43.3 billion) for its financial year that concluded on August 31. The CEO of Ingka Group, Jesper Brodin, provided insight into the challenging market conditions, stating, "In all our markets we experienced a slowdown of the economy and a slowdown of the home furnishing industry, almost simultaneously." He further added, "We never experienced anything like that since 2008, to be honest."

In response to the economic slowdown and the subsequent decline in store visits and quantities sold, IKEA made the strategic decision to reduce prices. This move was successful in increasing footfall and the volume of products sold. Brodin confirmed this strategy, stating that the price cuts had indeed boosted both store visits and sales.

IKEA's Investment and Market Share

The Ingka Group invested a substantial amount of over €2.1 billion in price cuts across its markets. Despite the challenging economic conditions and the significant investment in price reductions, IKEA managed to maintain its share of the global home furnishing market at a steady 5.7%.

Tolga Oncu, the retail manager at Ingka Group, highlighted that IKEA had managed to benefit from the global property slowdown. As consumer confidence was hit, households began trading down, which played into IKEA's hands. The company's affordable range of products became more appealing to consumers, helping to sustain its market share.

Looking ahead to 2025, IKEA is expecting a boost in sales. The company believes that lower interest rates will encourage more people to move houses, a trend that typically triggers an increase in the purchase of furniture items such as beds, sofas, and bookcases.

Future Plans and Online Sales Growth

However, the growth in store visits has slowed down. This year, store visits increased by 3.3% to 727 million, a rate slower than the 7.4% growth observed in 2023. The number of new store openings also fell to 41, down from 60. Despite this, Ingka Group has ambitious plans for the 2025 financial year, with 58 new locations planned worldwide.

In terms of digital sales, IKEA has seen a positive trend. The share of sales made online increased to 28%, up from 26% in 2023. This growth in online sales is reflective of the broader retail industry trend, where consumers are increasingly turning to online shopping for its convenience and ease.

As the holiday season approaches, Oncu expects people to spend more time hosting at home rather than going out, a trend that was also observed last year. This is largely due to budgets being constrained by inflation.

Inter IKEA Group, the owner of the IKEA brand and the manufacturer of its products, reported annual sales of €45.1 billion ($49.3 billion) across all franchisees, with Ingka Group being the largest. This figure represents a 5.3% decrease compared to 2023, largely attributable to the price cuts implemented as the cost of raw materials like wood fell.

Inter IKEA CEO Jon Abrahamsson Ring has indicated that more price reductions are planned for the 2025 financial year, which commenced on September 1. However, he suggested that these reductions would likely not be as significant.

Looking ahead, IKEA remains optimistic, expecting a recovery in the next year and a boost in sales in 2025. The company's ability to adapt to changing market conditions and consumer behavior will be key to its future success.