Ikea hit in full flight by inflation and the shortage of raw materials

During its financial year ended at the end of August, the yellow sign on a blue background did not exceed forty billion euros in turnover. Which seems comfortable, but we must remember that the turnover is not the final profit. This is the result of sales before payment of what are called “inputs“, everything that makes it possible to manufacture products, such as raw materials. If sales continued to increase, the group had to absorb nearly a billion euros in increased manufacturing costs.

Barely out of the chain breaks with the confinements imposed by the health crisis, the war in Ukraine has once again stopped the machine. Then, who says supply difficulties, says less raw materials, therefore more expensive products to obtain on the market to manufacture the furniture, added to that the traditional inflation. However, Ikea presents itself as the champion of inexpensive furnishings. We then observe a scissor effect: more expensive raw materials upstream to manufacture products at reasonable prices downstream. It doesn’t happen anymore.

To limit the impact of inflation on its customers, Ikea has lowered its prices, up to 20% in Poland, 10% in Belgium on the famous shelves Billy. This undermines the profitability of this type of very popular product. Eventually, Ikea will be forced to raise its prices.

A few weeks after the start of the conflict, the Swedish brand reduced the size of its commercial establishments. Ikea has gradually closed all its Russian stores and 10,000 employees have been laid off out of a total of 12,000. Ikea remains established in thirty-two countries and is refocusing on city centers to reach another, more urban, financially more comfortable.