IKEA poised for future growth?

In FY 2015, IKEA Group has seen its sales rise by 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 our online expansion have all contributed to these results,” the company has announced, reporting that its highest sales were in Germany (14 pct of total sales), the US (14 pct), France (8 pct) and the UK (7 pct). Poland turned out to be the retailer’s second strongest market in terms of  purchasing value (19 pct), only behind China (25 pct).

60 new stores by 2020

Around 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 (at the close of the financial year ending August 31st, 2015). The retail giant is now physically present in 28 countries, while operating online stores in a nearly half of these (13). In the last financial year it managed to generate EUR 1 bln in revenue this way. At the same time the retail giant opened 13 new locations worldwide, including six in Western and Northern Europe – and a CEE store, in the Polish city of Bydgoszcz. According to the IKEA representatives who spoke to ‘Eurobuild CEE’, the retailer intends to open 60 new large-format stores in Europe by 2020. Meanwhile, the rental income from the group’s shopping centre arm, which operates 40 malls and 25 retail parks in 14 countries, has now reached EUR 800 mln. Currently IKEA is also carrying out twenty shopping centre development projects across Europe, Russia and China. “Owning and managing shopping centres is a long-term commitment (…). With the IKEA store as the main attraction, the shopping centres provide family-friendly meeting places for the many people who visit them from near and afar,” reads the report.

Mix-and-match

Over the past year IKEA opened its first stores under a new concept in which they purely function as pick-up and ordering points. The new locations for this format can be as much as 90 pct smaller than the group’s signature blue and yellow big box units. Each comprise app. 2,000 sqm of retail and a showroom floor designed to merge the online and physical retail worlds. Such stores have already opened in Spain, Norway, Finland and the UK, while around twenty more pick-up and order points are to open by the end of FY16 in a number of 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.” Better accessibility and brand recognition are both of paramount importance for the future expansion of the Swedish colossus, which expects to significantly increase its revenues in the next few years. While the group is now working hard on improving its in-store pick-up and home delivery service availability across the markets on which it already retails online, it is simultaneously striving to reach customers in more isolated towns and cities. The new, more flexible format gives IKEA an unprecedented chance to open stores not only in less populated locations, but equally in busy city centres and high-streets, which at this point remain virgin territory for IKEA. Typically the retailer occupies sites on the outskirts of cities. In the UK, the chain plans to launch its second pick-up and order location this spring. The move will be followed by more openings over the year. “IKEA will be opening more 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 locations,” 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.