Investment in online business hits profit at Ikea

Investment costs at the Irish operation of furniture giant Ikea last year contributed to pretax profits tumbling by 71.5per cent to €2.53 million.

Customers in Ireland spent €3.58 million a week – €181.1 million across the year – at Ikea's Ballymun store and at its "click and collect" store at Carrickmines on products such as Lack tables, Expedit shelving units and Hemnes day beds.

The store’s online shopping channel, which opened in November 2017, generated €17.3 million in “click and collect” sales – 9.5 per cent of the total.

However, a 15.7 per cent rise in the cost of sales to €126.4 million in the 12 months to the end of August was the main contributory factor to the sharp drop in profits.

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The costs included a €2.5 million upgrade of the Ikea showroom at its Ballymun store.

Directors said that the 8.6 per cent increase in revenues last year was largely due to the launch of its e-commerce platform.

Outdoor furniture

“The new e-commerce sales channel has been more successful than expected and continues to grow,” they said. “This change in sales method has required additional investment by the company but the directors are confident this impact will improve as the business adjusts its costs.”

Ikea Ireland paid out a dividend of €9 million to shareholders last year and paid a further dividend of €2.5 million post year-end.

The number of people employed by Ikea Ireland continued to rise – from 674 to 720 – and staff costs increased by 9 per cent to €21.5 million.

The directors say that they remain confident of “the continued growth in e-commerce alongside enhanced services offers and the commitment to quality and price will strengthen its position in the market”.

The prolonged hot summer weather last year saw outdoor furniture sales leading the way, with sales growth of 29 per cent.

Remuneration of the business directors edged down from €307,680 to €291,630.