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IKEA

Sweden’s Ikea to hike prices by 9 percent due to supply chain woes

Ikea will hike its prices by an average of nine percent next year due to ongoing supply and transportation disruptions, the company that operates most of the Swedish furniture giant's stores said.

General view of one of the stores of the Swedish furniture giant Ikea in Jarfalla, near Stockholm.
Higher costs as a result of pandemic-fuelled shortages would now have to be passed on to customers, the company said. Jonathan NACKSTRAND / AFP

Thursday’s announcement comes as pandemic-fuelled shortages and shipping challenges ramp up inflation and pinch economies globally, with consumers increasingly feeling the bite.

 “Like many other industries, IKEA continues to face significant transport and raw material constraints driving up costs, with no anticipated break in the foreseeable future,” Ingka Group, the holding company that owns 90 percent of Ikea’s stores, said in a statement.

These higher costs — which are mostly being felt in North America and Europe — will now have to be passed on to customers, it added.

“The average of the increase in Ingka Group is around 9 percent globally, with variations across Ingka Group countries and the range, reflecting localised inflationary pressures, including commodity and supply chain issues,” Ingka group said.

According to the company, Ikea franchisor Inter Ikea Group absorbed costs amounting to 250 million euros ($283 million) across 2021 due to these logistical tensions, which were exacerbated by the rebound in demand after the first phase of the pandemic.

Last month, Inter Ikea group reported a 17 percent drop in annual profits, attributing the dent to a steep increase in transport and raw material prices.

Container transport prices are at record levels following the outbreak of the pandemic, which has disrupted maritime logistics.

At the same time, the franchisor behind the world’s largest furniture seller reported higher sales for the year at 25.6 billion euros, up eight percent.

But a global spike in energy prices, supply chain snags and surging demand has prompted runaway inflation.

In the eurozone, inflation reached 4.9 percent over one year in November, a record high since the introduction of the single currency in 1999.

In the United States, prices rose by 6.8 percent last month compared to November 2020, its highest level in 39 years.

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IKEA

Ikea to ‘scale down’ operations in Russia and Belarus over Ukraine

Swedish furniture giant Ikea said Wednesday it would "scale down" its activities in Russia and Belarus, after putting them on hold following the Russian invasion of Ukraine.

Ikea to 'scale down' operations in Russia and Belarus over Ukraine

Along with a slew of Western companies, Ikea announced in early March that it was suspending its Russian and Belarusian activities, affecting nearly 15,000 employees.

“Unfortunately, the circumstances have not improved, and the devastating war continues,” Ingka Group, which manages the majority of Ikea’s stores, said in a statement on Wednesday.

“Businesses and supply chains across the world have been heavily impacted and we do not see that it is possible to resume operations any time soon,” the company said, adding that it and the Inter Ikea Group had “decided to enter a new phase to further scale down the Ikea business in Russia and Belarus.”

The group said the retail business “will remain stopped, and the workforce will be reduced, meaning that many co-workers will be affected.”

Ikea has a total of 15,000 employees in Russia, including 12,500 employed by Ingka Group, the company said.

An Ingka Group spokesman said the company was not yet able to provide details on how many would be let go.

The company added that it planned “to sell out its home furnishing inventory in Russia,” and that the production side in Russia will “reduce the workforce and start the process of finding new ownership for all four factories.”

Two purchasing and logistics offices in Moscow and Minsk would also be permanently closed.

The Russian invasion of Ukraine, along with triggering unprecedented sanctions, sparked an exodus of foreign corporations including H&M, Starbucks and McDonalds.

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