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The flat-pack giant's secrets unpicked

Ikea reveals details of its profits for the first time, writes James Thompson

Saturday 02 October 2010 00:00 BST
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Back in 2005, the opening of a new Ikea store in north London at midnight was the scene of a stampede as an army of customers battled the police to get into the store and grab special offers, such as a sofa for £45.

Although the terrified staff were forced to bolt the doors of the Edmonton shop shut after half an hour, the opening only fuelled the public's intrigue with Ikea, which first brought its stylish flat-pack furniture at affordable prices to the UK in 1989.

But beyond its stores and almost unique product offer – complete with often mind-boggling assembly instructions – people in the 26 countries where it operates 280 stores know little about Ikea as a company. This is hardly surprising as the family-owned Swedish group has justifiably earned a reputation as a highly secretive organisation.

However, Ikea took a big step towards opening its doors yesterday when it revealed its global profits for the first time in its 67-year history. Despite a brutal recession in many of its markets, the group grew its net profits by 11.3 per cent to €2.5bn (£2.2bn), on revenues up by 1.4 per cent to €21.8bn, for the year to 31 August 2009. As part of its new-found verve for transparency, Ikea also unveiled a 27-page report, Welcome inside, which describes its business in detail.

An Ikea UK spokesman explained: "We want to be more transparent as an organisation."

The move is, in part, a result of Mikael Ohlsson, its Swedish president and chief executive, in September 2009 replacing Anders Dahlvig, who had been at the helm for a decade. But the decision is also likely to have been influenced by external pressure. This was perhaps applied most significantly by Johan Stenebo, a former senior manager, who published countless allegations about Ikea's sect-like practices last year in his book, Sanningen om Ikea (The Truth about Ikea).

Perhaps Ikea has also come to realise that its secrecy policy had become increasingly anachronistic. Robert Clark, the senior partner at Retail Knowledge Bank, said: "I think there is a wider agenda there that increasingly these days companies employ lots of people and they have the right to know the basics about the business at which they work. It is arguably a dated family-type of reaction to think that it is no one else's business as long as you serve customers correctly at the right price."

He added: "I think there is also the fact they have become a global company and the trend is towards transparency and pressure has been applied by various bodies, such as the European Union."

In terms of its performance, Ikea was buffeted by the global recession and downturn in the housing market.

Soren Hansen, Ikea's vice president and finance director, said: "2009 was a tough year."

This slowdown was evident in the UK, where Ikea has 18 stores. For the year to 31 August 2009, pre-tax profits at Ikea UK plunged 42 per cent to £43.5m, according to accounts filed at Companies House. While Ikea was affected, like many other UK retailers, by the slowdown in economy and the housing market during the credit crisis, it benefited from numerous furniture retailers, from MFI to Land of Leather, collapsing over this period.

Neil Saunders, the consulting director at Verdict, the retail consultancy, said: "Ikea has still outpaced the market and grown its UK market share considerably throughout the recession and is still growing."

However, not all industry experts are convinced. Nick Bubb, an analyst at Arden Partners, said: "The Scandinavian minimalist look is not quite as in vogue as it was. The word of mouth stuff about parking, travelling across the store to get to the check-out, and the hassle of queuing does eventually impact on the goodwill of customers. It is a combination of things."

But Ikea has always divided opinion, illustrated by its latest UK television campaign. In early September, the retailer aired the advertisement, which shows 100 cats being released into its Wembley store, and it quickly became a hit on YouTube.

No doubt Ikea's new chief executive had a more serious message than "Herding Cats" in mind when he decided on its new transparency move in December 2009.

Mr Ohlsson said: "The yearly summary is aimed at our co-workers and suppliers as well as other stakeholders, who have shown an increasing interest in knowing more about different parts of Ikea."

The men behind the Ikea Empire

Ingvar Kamprad

The founder appears to have been born with an entrepreneurial gene and started selling matches to his neighbours at the age of five. He established Ikea in 1943 aged just 17 after his father gave him money for doing well in his studies. He used his initials, the farm where he grew up (Elmtaryd) and his home parish (Agunnaryd) to form the company's name.

One of the world's richest men, he now lives as a tax exile in Switzerland but the peace of his twilight years was shattered by a book published by Johan Stenebo last year. In a 20-year career at Ikea Mr Stenebo served as Mr Kamprad's right-hand man, but described him in the book as a "dictatorial genius" who had managed to create a phony image of himself as a sweet old man.

Mr Kamprad has dismissed all of the allegations on Ikea and his family in the book as the author's personal opinions.

Mikael Ohlsson

Thirty years after starting his Ikea career in the carpet department at a store in Sweden, Mr Ohlsson landed the job of chief executive in September 2009. Married with three children, he quickly set about trying to dismantle the wall of secrecy that his predecessor and founder had so carefully constructed.

Just three months after taking the helm, the company's supervisory board took the decision to publish its global financial summary each year that appeared for the first time yesterday. Showing his eco-credentials, he has vowed that all Ikea buildings will be supplied with 100 per cent renewable energy in the long term. But baring his teeth, Mr Ohlsson has pledged that Ikea will remain "lean and simple" and has launched a lower-cost structure at Ikea, where gains will be passed on to customers. His favourite Ikea product is its kitchen range.

Anders Dahlvig

In his 26-year stint at Ikea, he became the company's public face and was almost as synonymous with the flat-pack giant as its founder. As such, he was viewed by some as a leader who perpetuated Ikea's unique and often secretive culture.

Mr Dahlvig, 52, bestrode the Ikea empire as chief executive from 1999 to 2009 and oversaw the chain as it spread its global tentacles into countries including Russia, Japan and Portugal.

Under his stewardship, Ikea more than doubled from 130 to 270 stores worldwide and increased revenues from €7.3bn (£6.3bn) to €21.3bn.

Before taking the top job, he ran Ikea Europe and between 1993 and 1997 he was its managing director in the UK. In a nod to his UK experience, Mr Dahlvig joined the board of the global DIY group Kingfisher, which owns the B&Q chain, in December 2009.

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