Ikea will Raise Prices amid Supply Chain Issues

Ikea is raising prices as a result of the worldwide supply chain disruption, which is projected to continue throughout next year.

Ikea announced a dip in full-year earnings on Wednesday, owing to rising transportation and raw material costs.

According to the Reuters news agency, it would pass part of these expenses on to its stores in the following year, allowing them to charge customers more.

As economies recover from the Covid epidemic, businesses have been grappling with supply chain issues.

During the epidemic, the Swedish furniture firm witnessed unprecedented demand as individuals spent more time at home.

However, Ikea Group’s pre-tax earnings plummeted 16 percent to €1.7 billion (£1.4 billion) in the year to September, despite the fact that the company generates the majority of its money selling items to its franchisees.

Profit was down 4% in 2019 compared to the year before the epidemic.

“The high increase in transport and raw material prices in the second part of the financial year,” it added, had the most toll on company earnings.

“It’s been difficult to keep Ikea shops and warehouses stocked. Supply chain interruptions resulted in a significant decline in product availability, which we have yet to recover from. We expect this trend to continue far into [Ikea’s fiscal year 2022] ” It was also added.

Martin van Dam, the company’s chief financial officer, predicted that the impacts of the global supply chain issue and high energy costs would endure for a long time, predicting that 2022 would be “a more challenging year with greater obstacles.”

Ikea did not raise retail pricing in the fiscal year ending in September, but it did say it will pass on some of the increased raw material and transportation expenses to store owners this fiscal year.

“Though we won’t be able to guarantee fixed pricing to merchants in these hard times,” it stated, “we also aim to absorb a portion of the rising expenses throughout FY22.”

Mr Van Dam stated that business owners will have some discretion in deciding whether or not to pass on higher pricing to customers.

Ikea’s statement comes after CEO Jesper Brodin indicated in mid-October that port congestion had caused supply issues.

“We’ll have to deal with disruptions over the next year,” he added.

Due to inventory shortages, Ikea has been compelled to purchase more transportation capacity.

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