As Ikea wrestles with falling sales, the Swedish retailer which has a presence in every state of Australia, except Tasmania, and has been reported to be legally avoiding paying the country’s tax system millions, has slashed prices to attract customers.

Inter Ikea Group confirmed that its retail sales for the financial year 2024 which ended August 31 fell 4 per cent to EUR45.1 billion (A$73.15 billion).

The CEO of the Inter Ikea Group, Jon Abrahamsson Ring , confirmed that prices have been slashed across all the markets where it operates globally. “In FY24 we substantially lowered prices across all 63 markets, making IKEA more affordable for many people.”

The company claimed that as a result of the price decreases, Ikea saw an upward trend both in-store visitation (+4.5 per cent) and online visitation (+21 per cent), while volumes were “stable”.

Although Ikea hasn’t yet released Australia specific figures for FY 24, its FY 23 figures reflected a loss of A$48.5 million. As ChannelNews has previously pointed out, Ikea have legally avoided paying millions on the billions they are generating from Australian consumers. Between 2017 and 2023, the Ikea business generated $10.63 billion in revenue from Australian consumers, but only managed to deliver $89.9 million in profits, with unexplained expenses, franchise fees and payments ever-growing net losses pushing the bulk of their revenues into the coffers of their tax haven subsidiaries.

Ikea Australia

 

Now, Ikea claims it is seeing a massive slowdown of the economy across markets. “In all our markets, we experienced a slowdown of the economy and a slowdown of the home furnishing industry, almost simultaneously,” said Ingka Group CEO Jesper Brodin. “We never experienced anything like that since 2008, to be honest.”

Ingka Group said it invested around $2.3 billion (A$3.41 billion) in price cuts. It said that its share of the global home furnishing market stayed mostly unchanged at 5.7 per cent.

“We are in times when dreams and needs for a better life at home are greater than ever,” said Brodin. “At the same time, inflation and interest rates have impacted on people’s wallet and when times are challenging for people, we want to support in the best possible way.”

In Australia, stubbornly high interest rates have already squeezed discretionary spending among customers. With the RBA signaling that rate cuts aren’t likely for the remainder of this year, consumers aren’t ready to splurge.

Furthermore, a housing crisis is having a detrimental effect on the retailer that specialises in home décor products.

According to figures from the Australian Bureau of Statistics (ABS), the 2023-24 financial year was the worst in more than a decade for new home builds.

New home construction dropped by 8.8 per cent in the past year, amounting to 158,690 new homes

The RBA governor, Michele Bullock, told the parliament recently that home building costs are still climbing sharply at a rate of 5 per cent annually, making it harder to get inflation back to target.

Construction costs have increased about 25 per cent since the pandemic. Bullock said the shortage of tradespeople had been compounded by financial concerns at construction firms, who signed fixed-price contracts and were now finding projects unprofitable to complete.