IKEA Prices Drop: Ingka Group's Strategic Move for Greater Reach

The world's largest IKEA franchisee, Ingka Group, reported a sharp decline in net profits due to price cuts aimed at attracting more budget-conscious consumers. Despite reduced revenues, the strategy led to an increase in store visits and product sales, with Germany remaining its biggest market.

Ingka Group, the largest IKEA franchise operator, has announced a significant dip in annual net profits after implementing price cuts to lure budget-minded shoppers. This move comes as part of a strategic decision to increase accessibility and sales volume through affordability.

The group's net profit fell to 800 million euros from 1.5 billion euros the previous year, as it lowered prices to stimulate foot traffic in its stores. Operating profit also declined to 1.3 billion euros on a 3% margin. Despite a 5.5% drop in total revenues to 41.8 billion euros, footfall in stores rose by 3.3%, and online visits surged by 28%.

According to Juvencio Maeztu, deputy CEO and CFO, the group's strategy of selling more items at lower average prices is succeeding in broadening its consumer base. Key markets like Germany continue to drive sales, as Ingka Group remains focused on long-term investments and financial independence, reinforcing its commitment to accessibility in a competitive market.

(With inputs from agencies.)