Ikea feels the pinch of slowing market
Thursday 10 April 2008
Ikea is the latest big-ticket retailer to complain of falling sales as the slowing housing market takes its toll on consumer spending.
Anders Dahlvig, the chief executive of the privately-owned Swedish company, told the World Retail Congress in Barcelona yesterday that the chain will need to lower prices to remain competitive.
"We are feeling the downturn in some important markets, for instance the US, the UK and Germany," Mr Dahlvig said. "On other the hand it is an opportunity because in bad times the competition is hurting as well.
"We have to continue to reduce our prices because people have less money – if we want to keep up growth that is where we have to make investments," he said.
Ikea, which has 260 shops across the world, is by no means the first retailer to suffer. A survey by Grant Thornton, the accountancy group, earlier this month, showed that almost a quarter of UK-listed retailers issued negative trading statements in the first three months of 2008, compared with just 10 per cent last year.
And although overall like-for-like retail sales were up by 1.5 per cent in February, discretionary spending is taking a hit. "Despite some continued discounting, clothing and footwear were down on a year ago. Consumer confidence has fallen further to all-time lows. Shoppers are still very price-conscious and reluctant to splash out on major purchases," said the most recent report from the British Retail Consortium.
Homewares and furniture are particularly affected. Land of Leather and SCS Upholstery have both reported falling sales in the last month alone. Homebase saw a 5.3 per cent decline in like-for-like sales in the eight weeks to 5 January.
And DSG International, which owns Currys and PC World, issued a stark profits warning after poor Christmas trading that sent shares plummeting to a 12-year low.
"Big-ticket home-related items have seen some very weak trading numbers so it is no surprise Ikea is beginning to find it difficult," Christian Koefoed-Neilsen, an analyst at Panmure Gordon, said. "And if you don't have the scale of purchasing that Ikea has got and as much power over suppliers then it is more difficult to get lower prices without directly affecting your margins."
The problems are the classic consumer response to contractions in the property market. "Falling house prices means negative performance from DIY chains, furniture retailers and also electronics shops," Ira Kalish, the director of consumer business at Deloitte Research, said.
Malaysia Airlines plane crash exposes alarming flaw in airline security: over one billion flights made last year without stolen-passport check
International Women's Day 2014: The shocking statistics that show why it is still so important
Teacher shows sex tape featuring herself to pupils during class by mistake
Swarm of killer bees sting woman 1,000 times
Dead woman's body found sitting in a car after six years after direct debits ran $54,000 bank account dry
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
Poor 'live like animals' says Boris's privately educated sister after going on 'poverty safari'
Exclusive: Impact of immigrants on British workers ‘negligible’
Vince Cable: Teachers 'know absolutely nothing' about the world of work
Ukraine crisis: Russia pledges to 'retaliate against sanctions' as Ukrainian president says Crimea vote will not be recognised
- 1 International Women's Day 2014: The shocking statistics that show why it is still so important
- 2 Australian man Rod Sommerville reacts to bite from deadly snake by reaching for cold beer
- 3 Singapore sting: Sky-high prices are pushing locals to the edge of affordability
- 4 Russia has made 'big miscalculation' over Ukraine warns Hague
- 5 Swarm of killer bees sting woman 1,000 times
iJobs Money & Business
£12000 per annum: Inspiring Interns: The company works with Tier 1 FTSE 100 Ba...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...