‘Very challenging’: Ikea slashes prices as cost of living impacts customers

Furniture titan Ikea says it is doing one thing in a “challenging environment” to help Aussies through the cost-of-living crisis.

Furniture and home accessories behemoth Ikea is looking to reduce prices across its 10 Australian stores in a move it hopes will help drive customer demand.

Ikea Australia chief financial officer Ricardo Pereira told NewsWire exclusively the business was focusing on price and bringing better value to Australian customers during a “very challenging retail environment.”

“We invested over $125m to reduce our prices across 3000 products, with $100m of this invested in the last financial year. Our main goal is to become more and more affordable, especially in a period when the cost of living is so hard for customers,” Mr Pereira said.

Ricardo Pereira says Aussies are doing it tough. NewsWire / Jeremy Piper

The discounted items come as the business flags falling sales in financial statements provided by Ikea. Sales are down 3.17 per cent to $1.725bn across FY24. While sales fell, Ikea became profitable again in 2024, increasing net profits to $51.3m in the year after a $48.4m loss in 2023.

It is a similar story overseas, with Inter Ikea Group confirming that its retail sales for the financial year 2024, which ended on August 31, fell 4 per cent to 45.1 billion euros ($A73.15 bn).

Mr Pereira said the company’s structure as a trust meant it could lower prices to customers during difficult times, as it did not need to deliver year-on-year gains to shareholders.

“Of course there was a big price increase in products worldwide during Covid and after Covid, and now we are investing a lot to put our prices back to where they were pre-pandemic,” he said.

Mr Pereira said the company’s mission was to reach as many people as possible, claiming successes in key metrics including visitors to its stand-alone and online stores.

Ikea said it had 350,000 more visitors to physical stores in the last financial year, while its online store had about 105 million clicks

“In this way we were successful,” he said.

“Our main vision is with our affordable range that are quality, sustainable and have low prices. We think the more people we reach, the more we enable people to have a good life. We believe to have a good life you have to have a good home.”

Focus on the Australian market

Despite Australia being one of the last countries in the OECD to cut interest rates and having endured an 18-month retail recession, Ikea says there is still strong growth potential in our market.

Ikea is expecting interest rates to remain higher until the mid-half of the year and consumer confidence to pick up afterwards, which should help boost sales.

“The brand has a huge potential in this market. We are celebrating our 50th anniversary in a couple of months, but we still have potential to reach more Australians,” Mr Pereira said.

He says the Australian market still has plenty of growth as the business celebrates 50 years in the country. Picture: NewsWire / Jeremy Piper

“We are getting better at explaining how to furniture a house with good quality furniture at a low price, with a product range from small to large wallet sizes,” he said.

In Australia, there is still a big space to grow, but in what format depends on the customers themselves.

Ikea said while it wanted to maintain global quality, it changes each individual store to match the local tastes and needs, with customers in Perth presented with slightly different options to those in Melbourne.

“In each country we try to adjust what we present in every country to suit the individual customers. For example, if you go to Japan where they live in smaller apartments, you will see tiny kitchens, smaller lounges, smaller areas of expositions to reflect the needs of the culture,” Mr Pereira said.

“While in Australia because the majority of our customers live in houses and less in apartments, we show bigger spaces to reflect their individual needs.”

“It is also a little bit adjusted depending on the city, so Melbourne looks a little bit different to Perth.”

Food a growth pillar

While a trip to Ikea often finishes with picking up a plate of Swedish meatballs or a hotdog after shoppers work their way through the store, Mr Pereira said its food sales were outgrowing its furniture store.

Ikea’s food division is surprisingly outperforming its retail sector. Picture: NewsWire / Jeremy Piper

Flagging cost-of-living pressures, Ikea said its food division was a bright spot in its business, with customers looking for an affordable way to have a meal with their family.

“The business of Ikea food has been growing faster in the last two years than Ikea furniture. Usually, it’s a reaction to when people have less money. People tend to eat out where they can afford and in this case Ikea food is very affordable,” Mr Pereira said.

Over the last two years, Ikea says its food division is becoming the fastest-growing sector, beating its furniture stores.

The company says it is expecting strong growth in this division to continue over the new year.

“The meatballs sell very well, as Australians are a meat-loving country, but we try to offer other dishes to customers,” Mr Pereira said.

“We will keep trying to develop the range and there will be more to come in the new year on that range.”