Ikea UK hit with £33m loss amid pandemic

Nonetheless, in light of store closures across its estate, Ikea UK saw digital sales increase by 31% as more customers turned to online shopping

Ikea UK has announced that total sales fell by £200m to £1.9bn in its full-year ended 31 August 2020, down from sales of £2.12bn reported in FY19.  

While the furniture giant decreased its costs by 3.4% to help shore up its finances, it still reported an overall loss impact of £32.7m in 2020, against a loss of £2.5m reported the prior year.

Despite “performing well in a challenging market” for the first six months of the financial year, enjoying 4% year-on-year growth in turnover, turnover for the full-year fell by 10.2% in light of the pandemic, down from a growth of 8% in 2019.

Nonetheless, in light of store closures across its estate, Ikea UK saw digital sales increase by 31% as more customers turned to online shopping. In total, online sales represented 27% of total sales in the period, up from 19% reported the previous year. 

To accommodate the rapid shift in consumer behaviour, the group fast-tracked the launch of its national Click and Collect programme, which turned stores into local fulfilment centres and safe collection points for customers. In total, it operated 4,000 Click and Deliver DPD drop-off points.

While the “significant” increase in online sales and fulfilment costs impacted its profitability, it “chose to absorb many of these costs rather than pass them onto our customers”, which “inevitably” impacted Gross Margin.

However, this was reportedly compensated by an improvement in other elements of Gross Margin and the positive impact of the strengthening British pound. Overall, Gross Margin for 2020 was 27.1%, slightly higher than in 2019 at 26.8%. 

In order to support employees through the period, the group paid 100% of contracted hours to all co-workers, despite ongoing store closures. In addition, it launched the IKEA Covid-19 Emergency Fund, available to financially support employees that needed it.

It also advanced its sustainability initiatives in the period, and was one of 20 retailers who collaborated with the British Retail Consortium (BRC) to develop a Climate Action Roadmap for the retail industry ahead of the British Government’s 2050 target. 

Constantinos Mourouzides, CFO Ikea UK and Ireland, said: “2020 was the year that changed everything – from the way we live our daily lives, to the way we do business. As a result, we found ourselves in a new reality, leading in the unknown. At IKEA we managed to navigate through what has been a very turbulent year, guided by our strong culture and values. 

“The new services and initiatives introduced at lightspeed in 2020, combined with our newly enhanced agile working practices, mean we are optimistic about the future and maintaining a leading role in the UK home furnishing market.” 

He added: “Becoming leaner and more flexible in our operating model as we expand customer touchpoints will be critical to protecting our profitability going forward. We also emerge with a stronger and more extensive customer service offering, which will serve us well and make us more robust and resilient in the future.” 

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