IKEA Korea reports 10 percent drop in sales on year as interior design boom ends

IKEA Korea reported sales of 618.6 billion won ($445 million) in the fiscal year ending August, down 10 percent on year as the interior design boom of the pandemic comes to an end.

Fredrik Johansson, country retail manager of IKEA Korea, talks at a press conference held at IKEA’s Gwangmyeong branch in Gyeonggi on Wednesday. [IKEA KOREA]

IKEA Korea reported sales of 618.6 billion won ($445 million) in the fiscal year ending August, down 10 percent on year as the interior design boom of the pandemic comes to an end.

Fiscal year 2022 is the first time IKEA Korea reported a drop in sales since it started releasing financial statements in 2018. The furniture company did not disclose its net and operating profits.

“Considering the Covid-19 situation, revenge spending after Covid-19 and the availability situation we were having during the year, this is a result that we are very happy with,” said Fredrik Johansson, country retail manager of IKEA Korea during a press conference on Wednesday.

Johansson noted that sales dropped because its products were less available during the pandemic due to supply chain disruptions, although the company has currently recovered from the issue. Sales also slowed down as social distancing regulations eased, with people less interested in buying home decor and wanting to engage in outdoor activities.

“Another external factor that is a huge impact to our business is the very few housing transactions that we are experiencing here in Korea,” said Johannson. “When people move, there is more need for home furnishing, and we have record low housing transactions that continue to go down.”

The company’s online sales rose 12 percent on year. Although reporting an on-year rise, growth slowed down compared to the 34 percent on-year rise in online sales the previous year.

It saw 66.8 million visitations both online and offline, down 4.5 percent on year.

To enhance sales, the company will focus on enhancing its online services, offering interior design consultations via online chats and video calls.

Despite sales slowing down, IKEA Korea said it will try its best to keep prices lower than its competitors. The company did raise the price of some products in April stating rising raw material costs and logistics fees, but Martina Seidel, country commercial manager of IKEA Korea, said the company will lower prices for products that saw a price hike when those two issues are resolved.

More IKEA stores will open in the coming years, with one slated to open in Gangdong District, eastern Seoul, in the second half of 2024. Another will open in Daegu in the first half of 2025.

Although IKEA is known for its big-box stores, the company said it will open smaller branches in various locations in an attempt to reach out to customers who live far away from its existing branches. It currently sells IKEA products and offers home decor consultations at a small two-story building in Gwangju, and plans to do so in other locations.

The company also vowed to focus on sustainability.

A total of 42 percent of its food menu will be made with plant-based ingredients by end of fiscal year 2023, compared to the current 25 percent.

Some 30 percent of its delivery trucks are electric vehicles (EVs), and 60 percent will be EVs by fiscal year 2023. The company aims for all its delivery vehicles to be emission-free by 2030.

BY LEE TAE-HEE [lee.taehee2@joongang.co.kr]