The world's leading furniture retailer, Ikea, has reported a significant decline in its annual profits, driven by a strategic decision to lower prices for customers and increased costs linked to US import tariffs.
Sharp Decline in Fiscal Performance
For the fiscal year 2024-2025, which concluded in late August, Ikea's profit after tax plummeted by 32 percent, landing at 1.5 billion euros ($1.7 billion). This sharp drop was confirmed by the company's chief financial officer, Henrik Elm, in an interview.
Elm attributed this decline directly to the company's aggressive pricing strategy. 'We saw effects based on the big price decreases,' he stated, explaining that this move was a core part of Ikea's long-term business model to attract more shoppers.
Billions Invested in Price Reductions
Following a period of increased prices after the Covid-19 pandemic, the Swedish furniture giant made a conscious shift. Over the last two fiscal years, Ikea allocated a substantial sum between two and three billion euros to fund price reductions averaging 10 percent across its product range.
This strategic price cut proved successful in driving customer traffic. While overall sales revenue saw a slight dip of one percent to 44.6 billion euros, the company experienced a 2.6 percent increase in sales volume and a 1.9 percent rise in store visitors.
Operating Profit Hit by Tariffs and Costs
The financial report also revealed a 26 percent fall in the operating profit of Inter Ikea, the group's main holding company, which settled at 1.7 billion euros. This was a result of the dual pressure from lower consumer prices and heightened supply chain expenses.
Among these increased costs were those related to higher tariffs on imports into the United States, a market that represents 10 percent of Ikea's global sales. The company noted that it had absorbed some of these additional costs.
Despite the current challenges, the outlook from the company remains cautiously optimistic. Elm highlighted that Ikea has strengthened its store inventories to ensure product availability, positioning the brand to capitalize on future benefits as it moves into the 2026 fiscal year and beyond.
