Swedish furniture retailer Ikea has posted its biggest ever profit in Australia after years of losses as sales boom through Covid-19

Following years of worsening losses in Australia, despite booming sales, the hugely popular flatpack furniture giant has finally delivered a major profit.

Ikea has made its biggest ever profit in Australia since opening its maiden store in 1975 as consumers rush its flat-pack furniture. (Photo by Andreas Rentz/Getty Images)

Swedish retail giant Ikea, famous for its flatpack furniture and cheap meatballs in its store cafeterias, has posted its largest ever profit since first opening in Australia in 1975 as the rush to set up home offices and redo living spaces through the pandemic put a rocket under sales.

After years of worsening losses despite its huge popularity in Australia and booming business across its 10 local big-box stores, Ikea’s Australian arm is finally profitable and in 2022 witnessed the most successful year in its history here.

According to latest financial documents lodged with the corporate regulator Ikea’s net profit for fiscal 2022 zoomed to $82m, up almost tenfold from the previous year when profit was only $7.89m. In 2020 Ikea posted a loss in Australia of $8.66m.

Sales for 2022 hit $1.699bn, up from $1.62bn in 2021.

The bottom line net profit of $82m easily surpasses any other year of operations for Ikea since it opened its first store almost 50 years ago and follows years of losses for the furniture retailer in Australia despite its huge popularity.

It was only in 2020 that Ikea slumped to its fourth consecutive loss in Australia despite the retailer saying the Covid-19 pandemic had no “material impact” on the company’s financial position.

The rush to set up home offices in the early stages of the pandemic as millions worked from home, as well as tens of billions of dollars in government stimulus and the early release of superannuation funds, boosted the fortunes of many retailers. But Ikea still made a loss in 2020 and as its sales surpassed $1.5bn.

Despite Ikea enjoying huge popularity in Australia, and around the world, its 10 Ikea stores in Australia hadn’t made a profit since 2016, while key competitors such as Harvey Norman, Officeworks, Bunnings and other retailers had rung up growing profits.

Its struggle to turn a profit in Australia also came as Ikea’s sales more than doubled from $733m in 2014 to more than $1.54bn in 2020, and it just couldn’t transform those rocketing sales into a bottom line profit.

But now the tide is turning for Ikea in Australia with it stringing together two consecutive profitable years, and its net profit position in 2022 improving by more than 900 per cent. The ASIC accounts reveal that gross profit in 2022 was $724.08m against a gross profit of $622.76m in 2021.

Ikea Australia’s profit before tax in 2022 was $117.6m, up from $18.22m.

The Swedish retailer also contributed more to the government in tax last year, paying $35.61m in income tax according to its financial report, against only $10.33m in tax in 2021. Although according to its profit and loss statement its taxable income was slimmed down by more than $153.9m in “other expenses” and $53.446m in “franchise fees”.

In the last eight years Ikea has notched up more than $700m in these expenses which has shaved its pre-tax profit. In the past these expenses and franchise fees had shrunk its taxable profit or swung it into a loss. In 2020 an 11.2 per cent rise in operating profit to $584.8m became a loss before income tax of $12.5m, as charges mounted.

Ikea founder, billionaire Ingvar Kamprad, gave away his business in the 1980s to the INGKA charity, which is dedicated to promoting and safeguarding the future of architecture and furniture. It has also given some money to help children in poor countries.

In 2014 a document among the “Luxembourg leaks” reportedly showed that Ikea’s profit growth in Australia between 2004 and 2014 trailed sales growth - or occasionally went in the opposite direction - as it reduced its taxable income by paying more than $2bn in franchise fees, licence fees and royalties to its European parent. These practices are not illegal.