STOCKHOLM (Reuters) - IKEA reported annual sales above 40 billion euros ($44 billion) for the first time on Wednesday as the Swedish furniture group’s push into e-commerce produced another surge in online revenue.
IKEA was slow to embrace online services but since 2017 the world’s biggest furniture retailer has invested heavily to adapt to new shopping habits and competition from digital rivals such as Amazon and made.com.
In the 12 months to the end of August, IKEA said it sold goods and services worth 41.3 billion euros, a 6% rise from 38.8 billion last year including a 43% jump in online revenue to 2.9 billion euros. The addition of new stores also boosted sales.
Besides developing digital and other services such as furniture delivery and assembly, IKEA has set up stores in the heart of cities such as Paris which serve as showrooms, also helping to drive more online orders once shoppers return home.
IKEA is testing several new store formats and services such as furniture rental too.
“All in all, when you look at the numbers, also in light of course of the fact we are in a rather big transformation when it comes to developing our concept ... we managed to deliver while transforming as well and building IKEA for the future,” Torbjorn Loof, chief executive of Inter IKEA, told Reuters.
Loof said IKEA’s bedroom and kitchen ranges were important drivers of sales growth while its relatively new smart home product range - products connected to the internet - grew rapidly from low levels. He said IKEA would invest heavily in smart products in the coming years.
IKEA rolled out e-commerce to nine more markets in its latest fiscal year and Loof said by the end of August next year, the three or four markets yet to go digital would get online services.
Loof said sales at stores open a year or more rose about 1%, the same pace as last year but holding firm in a tough environment where many retailers are seeing a decline in sales from physical outlets.
IKEA stores are owned by 12 franchisees in more than 50 markets. Ingka Group, formerly IKEA Group, which has 374 stores, reported separately a 5.0% rise in local currency retail sales to 36.7 billion euros. Ingka’s online sales soared 46% to make up 11% of its total sales.
Ingka’s CEO Jesper Brodin told Reuters that among its biggest markets, Russia stood out with 17% growth.
He said Ingka’s investment levels were at a record high in the year and they would be even higher in the current fiscal year with a focus on digital services and new stores.
In fiscal 2017/18, large investments in improving its online and delivery services, as well as new smaller city center stores pulled Ingka’s profits down 26 percent.
Brodin said Ingka aimed to roll out a new shopping app it has tested in France and the Netherlands to all its 30 markets this fiscal year.
Reporting by Anna Ringstrom; editing by David Clarke