Inter IKEA Group, the parent company of IKEA, has announced that it will be increasing prices in response to ongoing supply chain challenges. The company reported a decline in full-year profit, primarily due to the rising costs of transportation and raw materials. Despite the high demand for home furnishings during the pandemic, Inter IKEA Group experienced a 16% drop in pre-tax profit in the 12 months through August, amounting to 1.71 billion euros ($1.98 billion). Compared to the previous fiscal year, profits were down by 4%.

According to the annual summary released by Inter IKEA Group, the decrease in operating income can be attributed to the significant increase in transportation and raw material prices in the second half of the financial year. The company primarily generates revenue by selling goods to its franchisees. As of October, retailers’ sales reached a record high of 41.9 billion euros, which is a 6% increase from the previous year and a 1% increase from fiscal year 2019. Despite product shortages, consumers in lockdown continued to heavily invest in furnishing their homes.

However, Inter IKEA Group has been facing challenges in maintaining sufficient stock levels due to disruptions in the global supply chain. As a result, there has been a significant decrease in product availability, and the company expects this issue to persist throughout the current fiscal year. Chief Financial Officer Martin van Dam acknowledged the long-lasting impact of the global supply chain crisis and high energy prices, stating that fiscal year 2022 will be a more challenging year with numerous obstacles to overcome.

Van Dam anticipates that costs related to the supply chain will continue to rise in the upcoming months. While Inter IKEA Group kept product prices stable for retailers in the past year, it has now announced that it will pass on some of the increased costs of raw materials and transportation to store owners in the current fiscal year. The company intends to absorb a portion of these additional costs but recognizes the difficult conditions it faces. Store owners will have the autonomy to decide whether and to what extent they will pass on the price increase to customers.

Overall, Inter IKEA Group acknowledges the need to address the rising cost pressures by adjusting its pricing strategies. Despite the challenges ahead, the company remains committed to pursuing growth opportunities while understanding the immense effort required in managing its supply chain and collaborating effectively with retailers.

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