Ikea’s Irish outlets record profits slump due to Covid-19 impact

Rise in online sales only partially offsets decline in revenues from €203.5m to €176.6m

Customers returning to Ikea in May after Covid-19 restrictions were lifted across the retail sector. Photograph: Dara Mac Dónaill

Customers returning to Ikea in May after Covid-19 restrictions were lifted across the retail sector. Photograph: Dara Mac Dónaill

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Profits at the Irish operation of Swedish home furnishings giant Ikea slumped last year due to the impact of the coronavirus pandemic.

Accounts just filed for Ikea Ireland show its pre-tax profit fell from €11.07 million in the 12 months to the end of August 2020 to just €3.7 million a year later.

Revenues declined 13 per cent to €176.6 million from €203.5 million with a rise in online sales only partially offsetting the losses. Overall, ecommerce revenues increased to 24 per cent of total revenues to about €42.3 million. This compares to 16 per cent or €32.6 million of turnover in the prior year.

Ikea, like other retailers closed its physical stores from mid March last year during the first lockdown period imposed by the Government. It reopened in June, once the restrictions were eased after the first wave of the virus. It was later forced to close between October and Noember and from January 1st of this year until May.

The directors report states that sales around the second and third lockdowns were stronger than for the first one and that they expect only a 5 per cent “deviation” from its sales target for 2021.

Online operations

The company’s online operations continued to operate during the lockdowns. The company, which employs nearly 700 people said it did not avail of Government supports during the period when the Ballymun store was closed.

It said the company had been enjoying a 4 per cent rise in turnover ahead of the lockdown, largely due to a rise in ecommerce activity.

Ikea operates a large warehouse-style store in Ballymun and an order and collection point in Carrickmines, south Dublin.

The accounts detail how Ikea switched distribution for its Dublin operation from the UK to Belgium to maintain supply flow following Brexit. The company said it experienced “initial disruption” to trade flows from “new border operation models and product requirement rules” but that these had not had a “significant impact” on the business.

The increase in online sales hit the company’s gross margins due to a resulting rise in fulfilment costs. Overall, its gross margin fell by 2.4 per centage points to 27.2 per cent for the year under review.

Confident

“The company remains confident that the continued growth in ecommerce alongside an enhanced service offer and the commitment to quality and price will strengthen its position in the market,” directors said. in a note accompanying the accounts.

Operating costs fell by 10.9 per cent over the year. Net liabilities increased however from €21.4 million to €23.6 million, largely due to a decrease in stock holding at year end.

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