Swedish furniture giant Ikea has reported a decline in global sales as it grapples with a sluggish housing market and reduced consumer spending on home furnishings.

The world's largest furniture retailer saw its annual sales fall by 5 per cent to €39.6 billion for the financial year ended August 31, according to Ingka Group, which owns most Ikea stores globally.

In response to the challenging economic environment, Ikea has implemented significant price reductions across its markets. Jesper Brodin, chief executive officer of Ingka Group, explained the unprecedented nature of the situation: "In all our markets we experienced a slowdown of the economy and a slowdown of the home furnishing industry, almost simultaneously. We never experienced anything like that since 2008, to be honest."

The company invested more than €2.1 billion in price cuts to maintain its 5.7 per cent share of the global home furnishing market. This strategy appears to have yielded some positive results, with store visits increasing by 3.3 per cent to 727 million this year, albeit at a slower pace than the 7.4 per cent growth seen in 2023.

In the UK, the impact of the economic downturn was particularly pronounced. Ikea's UK sales fell nearly 7 per cent to £2.3 billion in the year to August, as consumers reined in spending on furniture and home improvement. Peter Jelkeby, chief executive officer of Ikea UK, emphasised the company's commitment to affordability: "In a year of economic uncertainty, our priority was clear: stand with our customers. In spite of our reduced turnover, continuing to lower prices remains our long-term priority."

Despite the overall decline in sales, Ikea has seen growth in its online business. The share of sales made online increased to 28 per cent globally, up from 26 per cent in 2023. In the UK, online sales rose by 2 per cent, helping to offset the decline in physical store traffic.

Looking ahead, Ikea remains cautiously optimistic. Tolga Oncu, retail manager at Ingka Group, anticipates a potential boost to sales in 2025 as lower interest rates may encourage more people to move house, typically prompting purchases of furniture and home goods.

The company also continues to expand its physical presence, with plans to open 58 new locations worldwide in its 2025 financial year. In the UK, this includes a much-delayed store on Oxford Street in London and an outlet in Brighton, as well as five new small "plan and order points" offering kitchen and bedroom design consultations.

As the holiday season approaches, Ikea expects consumers to focus on hosting at home rather than going out, with budgets still constrained by inflation. The retailer aims to support this trend by maintaining its price reduction strategy, adapting to the evolving needs of cost-conscious shoppers in a challenging economic landscape.

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