Ikea posts 40% slide in pretax profits but stays upbeat on future

 

SHOPPERS SPENT almost €2 million per week at Ikea’s store in Dublin last year as the outlet recorded a 40 per cent drop in pretax profits to €6.8 million.

Accounts just filed by Ikea Ireland Ltd show that revenues at the Ballymun store dipped by 7 per cent from €110.7 million to €102.8 million in the 12 months to the end of August last.

The Irish outlet of the Swedish home-furnishing multinational failed to repeat the pretax profits of €11.4 million recorded in its first full year of operation in Ireland.

In their report accompanying the accounts, the directors said they believed Ikea will continue to gain market share during the downturn.

They said the financial services crisis, and its spillover into the real economy, has adversely affected the Irish retail environment and the company’s trading. “However, these threats are not considered to be significant.”

They said “no new stores are planned for the forthcoming year. Our long-term strategy continues to be one of expansion.”

The Dublin outlet – which is equivalent in space to 5½ soccer pitches – contains 9,000 home furnishing items, a 550-seater restaurant, a food hall and creche and has 1,850 car parking spaces.

The directors attributed the drop in revenues to the slowdown in the economy. “We continue to invest in our prices in the long term and to improve the shopping experience of our customers. We continue to believe that we can further strengthen our position in the market as a value-for-money retailer during these difficult times.”

They said that while the decline in the value of the euro is expected to affect the company’s profitability in the coming financial year, the impact is not considered by the board to be significant enough to prevent the company achieving its goals.

The company’s gross margin declined from 35 per cent to 32 per cent last year.

The cost of sales declined by 3.7 per cent from €71.6 million to €68.9 million. Administrative expenses decreased from €26.7 million to €25 million.

The number of staff employed dropped marginally during the year from 452 to 449 with staff costs declining to €8.4 million from €9.4 million.

Last year, globally, Ikea’s revenues increased from €23.8 billion to €26 billion, with the number of store visits by customers increasing from 699 million to 734 million.