Ikea aims for $1b in local sales
The Australian operations of Ikea, with five massive stores on the east coast, generated a robust 24 per cent jump in revenue to $649.97 million for the 12 months to August 31, 2012.
Up from revenue of $523.7 million in 2011, the sales rally easily beat flatlining sales for the broader retail sector and was helped by the opening of its new 39,000-square-metre Tempe store in Sydney's inner-west, as well as a second store in Victoria.
Documents lodged with the Australian Securities and Investments Commission show that Ikea Australia managed to convert strong top-line growth with a healthy expansion to its bottom line with its 2012 profit surging to $13.53 million from a profit of $2.771 million in 2011.
A decision to join other local retailers in a cut-throat discounting war has further bolstered Ikea's competitive position and pulled in more shoppers to its uniquely designed showrooms.
In 2012, Ikea announced it would cut prices on 900 products, some by as much as 50 per cent, on top of a similar promotion in 2011 when it reduced prices on 2500 items from its 9000 product range.
Although highly popular and profitable in Australia, Ikea had adopted a slow store expansion strategy in the region during its early years and only recently put its foot on the accelerator.
Although it entered the Australian market nearly 30 years ago, until 2011 the retailer had just three east coast stores - while single stores in Perth and Adelaide are operated under franchises. But then a rush of land deals and construction saw the new outlet in Tempe and a second in Springvale opened within quick succession.
It has also only recently launched an online site for Australian shoppers, and has gradually increased its floor space devoted to its eclectic line of Scandinavian groceries where shoppers can pick from Swedish delights such as marinated herring, sprats, chocolate, crackers or, of course, its famous meatballs.
Ikea is now squarely focused on doubling its Australian store base from five on the east coast to at least four in Sydney, four in Melbourne and three in Brisbane. It is believed to be looking to develop a site in Canberra, as well as on the central NSW coast.
The rapid store expansion set out for Australia comes as the recently appointed global chief of Ikea Group last week said he would accelerate the pace of worldwide store expansion, but drop an exact target for new outlets.
Ikea Group boss and company veteran Peter Agnefjall has stood by a previously announced aspiration to double sales to about €50 billion by 2020.
But he stepped back from confirming Ikea would meet a target set by its previous boss to open 20 to 25 stores a year.
Frequently Asked Questions about this Article…
Ikea Australia's revenue for the 12 months to August 31, 2012 was AUD 649.97 million, up from AUD 523.7 million in 2011. Profit surged to AUD 13.53 million in 2012, up from AUD 2.771 million the previous year.
The sales rally was driven by a decision to sharply cut prices across many products, the opening of large new stores including the 39,000‑square‑metre Tempe outlet in Sydney and a second Victorian store, and increasing shopper traffic to Ikea's showroom experience.
In 2012 Ikea announced price cuts on 900 products, with some reductions as much as 50%. This followed a 2011 promotion that reduced prices on 2,500 items from its roughly 9,000 product range.
At the time of the report Ikea Australia operated five large stores on the east coast. Recent openings included a huge Tempe store in Sydney's inner west (39,000 square metres) and a second store in Springvale, Victoria. Perth and Adelaide stores operate under franchise arrangements.
Ikea aims to roughly double its Australian store base, targeting at least four stores in Sydney, four in Melbourne and three in Brisbane. It is also believed to be considering sites in Canberra and on the central New South Wales coast.
Yes. Ikea has only recently launched an online site for Australian shoppers and has expanded floor space devoted to its Scandinavian groceries, including items such as marinated herring, sprats, chocolate, crackers and its famous meatballs.
Ikea Group boss Peter Agnefjall has reiterated a previously announced aspiration to double sales to about €50 billion by 2020, while saying he would accelerate worldwide store expansion but stopping short of committing to the previous target of opening 20–25 stores a year.
Everyday investors can note that Ikea Australia delivered strong top‑line growth and a substantial profit increase in 2012, helped by aggressive local price cuts, major new store openings and a push into online and grocery offerings. Those factors suggest Ikea's local strategy focused on price competitiveness and store expansion to attract more shoppers.
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