IKEA poised for future growth?

In FY 2015, IKEA Group has seen its sales going up 11.2 pct y-o-y, to EUR 31.9 bln. The group’s net profit reached EUR 3.5 bln, a 5.5 pct increase on 2014, while total assets increased from EUR 44.7 bln to EUR 50 bln. “Sales in comparable stores, the opening of new stores and online expansion all contributed to the result,” informed the company, which reported highest sales in Germany (14 pct of the total sales), the US (14 pct), France (8 pct), the UK (7 pct). Poland turned out to be the retailer’s second strongest market in terms of the purchasing value (19 pct) losing out to China (25 pct).

60 new stores by 2020

App. 60 pct of IKEA’s profit is currently being generated in Europe, where the group has 229 stores, 19 distribution centres and 34 production units (as of the end of the financial year ended on August 31st, 2015). The retail giant is now physically present in 28 countries while running online stores in a nearly half of them (13). Last financial year it managed to generate EUR 1 bln revenues this way. At the same time the retail giant opened 13 new locations worldwide, including six sites in Western and Northern Europe and a CEE store: in the Polish town of Bydgoszcz. According to what IKEA representatives told 'Eurobuild CEE', the retailer will open 60 new large-format stores in Europe by 2020.

Meanwhile, the rental income from the Group’s shopping centre arm, which operates 40 shopping malls and 25 retail parks in 14 countries, reached EUR 800 mln. Currently IKEA also carries out 20 shopping centre development projects in Europe, Russia and China. “Owning and managing shopping centres is a long-term commitment (…). With the IKEA store as a main attraction, the shopping centres create family-friendly meeting places for the many people that come from near and far,” reads the report.

Mix-and-match

Over the past year IKEA opened its first stores under the new concept which assumes that they function as pick-up and ordering points only. The new format locations, even 90 pct smaller than signature blue and yellow big box units, feature app. 2,000 sqm of retail and showroom floor and aim to merge the online and physical retail worlds. They have already opened in Spain, Norway, Finland and the UK. About 20 more pick up and order points will open by the end of FY16 in various countries in Europe, Asia/Pacific and North America, IKEA says. “Pick-up and order points make shopping with us more convenient for people who live far from a store or those who don’t have a car. And by expanding our shopping centres, we are creating opportunities to meet more people.”

Both better accessibility and brand recognition are of paramount importance for the future expansion of the Swedish colossus, which expects to significantly increase its revenues in the upcoming years. While the retailer is now working hard on improving the in-store pick-up and home delivery service availability across the markets on which it already sells online, it is simultaneously struggling to reach customers in more isolated towns and cities. And the new, more flexible format gives IKEA an unprecedented chance to open stores not only in the less populated locations, but equally in the busy city centres and high-streets, which at this point remain virgin territory for IKEA, typically occupying city peripheral sites.

In the UK, the chain plans on launching its second pick-up and order location this spring. The move will be followed by more openings over the coming year. “IKEA will open further order and collection points in the UK, exploring slightly different formats in each selected market and using this as an opportunity to find out more about how customers want to shop with IKEA in these areas,” the company’s representative told ‘Eurobuild CEE’. “We are also exploring potential locations across the country for our future expansion plans with our standard format stores,” he added.