Ikea forecasts more difficult year on supply-chain issues, store closures

Swedish home-furnishings giant Ikea forecast a more difficult year after reporting lower profit due to logistics logjams and store closures.

Inter Ikea, the worldwide franchiser for the brand, said Wednesday that net income fell 17% to 1.43 billion euros ($1.7 billion) in the 12 months through August. 

Chief Financial Officer Martin van Dam said this year will be more challenging amid inflation in raw material prices and supply-chain challenges. The biggest problem is that Ikea’s growth is being crimped because the company can’t meet demand, van Dam said.

“Supply-chain disruption creates by its definition a disappointed consumer,” the CFO said in an interview. The company forecasts sales will increase this year, though at a slower rate than in the past.

Inter Ikea had 250 million euros of additional costs to deal with labor and transport shortages last year, and the company expects that number to increase in fiscal 2022. 

Inter Ikea already gave a bleak outlook for the retail industry last month, saying it expects shortages from the supply-chain crisis to remain an issue through the middle of next year. Franchisees are increasingly testing smaller formats to add click-and-collect sites as consumers order more online, van Dam said.

Shortages of transport containers and blocked-up ports have snarled logistics for retailers around the world. The turmoil has led to warnings about slower sales growth and higher costs at companies from Hennes & Mauritz AB to U.K. online retailer Asos Plc. To cope with the situation, Ikea has been prioritizing and focusing its offerings on the most popular products. 

Inter Ikea’s franchisees had record sales of 41.9 billion euros in the past fiscal year. DIY makers have benefited as consumers working from home renovated their houses.

After keeping prices stable last year, the company said it will partially absorb cost increases in fiscal year 2022, passing on a portion of the inflation to Ikea customers.