Ikea Korea, the South Korean branch of the world’s largest furniture brand, has faced a continued downturn in its performance, reversing the growth observed last year. After experiencing a sales decline for the first time since entering the Korean market, Ikea Korea also posted its first fiscal-year loss this year.
Since last year, Ikea has been implementing cost-cutting measures by adjusting the business hours of its stores, with a reduction in operating hours at its first Korean store in Gwangmyeong starting next month.
According to the Financial Supervisory Service’s electronic disclosure system on December 14, Ikea’s sales for the last fiscal year (August 2022-September 2023) amounted to US$469.128 million, marking a 3.5 per cent decrease from the same period last year. Operating profit experienced an 88 per cent decline to 2 million, while net profit turned into a loss of $4.019 million, down from $10.2 million in the corresponding period last year.
Ikea attributed last year’s sales decline to the impact of the Covid-19 Omicron virus, which led to a reduction in the number of customers visiting large stores. Despite the reopening of stores as the pandemic situation improved, sales continued to decline. The ongoing real estate downturn and high interest rates have been identified as significant factors affecting the furniture industry, as furniture demand typically correlates with housing transactions.
A source from the furniture industry emphasized that despite an increase in apartment transaction volume, overall housing transactions have not stabilized. High interest rates are seen as a substantial burden, making it challenging for Ikea to sustain sales through smaller items alone.
In response to the challenging business environment, Ikea Korea has been proactively cutting costs by adjusting store hours and reducing SG&A expenses. Even the Gwangmyeong store, which had not previously adjusted its business hours, will implement changes starting next year. Commencing next month, Ikea Gwangmyeong will delay its weekday opening time by one hour to 11 am and close 30 minutes earlier at 8:30 p.m. These adjustments come as Ikea aims to navigate the current economic challenges and maintain a resilient business model.