Ikea's Strategic Price Cuts Impact Revenue

Ikea has experienced a 5.3% decline in revenue, ending the fiscal year with 45.1 billion euros. This drop is attributed to the company's deliberate price-cutting strategy aimed at boosting sales and increasing store visits. The Ingka Group, which operates most Ikea stores, considered the 2.1 billion euro investment in price reductions as a strategic move to combat challenges posed by a sluggish global economy and a shrinking furniture market.

Previously, during the pandemic, Ikea had raised prices by an average of 9% due to rising procurement costs and supply chain issues. However, the shift towards price reductions in September marked a significant change in strategy. This move has resulted in a 4.5% increase in physical store visits and a 21% rise in online traffic.

Despite the revenue decline, the number of furniture items sold has increased, underscoring the effectiveness of Ikea's business model. Moreover, the company has expanded its footprint by opening 43 new stores in countries such as Japan, Switzerland, China, the USA, and Italy. The sale of Ikea's well-known meatballs also saw a 25% increase, contributing significantly to overall sales.

Ikea's leadership remains confident that this approach will pay off in the long term, anticipating a rise in demand by 2025. Detailed financial figures are expected to be released by the year's end, offering further insights into Ikea's performance amidst these strategic shifts.