Supply Chain Issues Forces Ikea To Potentially Raise Prices For Consumers

Prices for its products are to be increased by Ikea because the global supply lines are anticipated to be disrupted for the rest of the year as well as extend into 2022.

A dip in full-year earnings was announced by Ikea on Wednesday owing to rising transportation and raw material expenses.

It will transfer some of these expenses on to its stores in the next year, allowing them to charge customers more, according to the reports.

As economies recover from the Covid-19 epidemic, businesses have been dealing with supply chain issues.

During the epidemic, the Swedish furniture firm witnessed unprecedented demand as individuals spent more time at home. However, there was a 16 per cent fall in the pre-tax earnings at Ikea Group, which generates the majority of its money selling items to franchisees, in the fiscal year ending September 30 to €1.7bn.

That was 4 per cent lower than for the comparable period of 2019 – prior to the pandemic hit.

The company said that it suffered the biggest hit to its profits from “the steep increase in transport and raw material prices in the second half of the financial year.”

“Keeping Ikea stores and warehouses stocked has been a challenge. Supply chain disruptions led to a substantial drop in the availability of products that we have yet to recover from. We expect this will continue far into [Ikea’s 2022 fiscal year],” the company added.

The impacts of the global supply chain problem and high energy costs might linger for some time, said the company’s Chief Financial Officer, Martin van Dam, and predicted that 2022 will be “a more challenging year with greater obstacles.”

In the fiscal year ending September, Ikea did not raise its product pricing to retailers, but it did imply that it will pass on some of the increased raw material and transportation expenses to shop owners during this fiscal year.

“Though we can’t continue to secure fixed prices to the retailers under these challenging conditions, we also plan to absorb part of the increased costs during FY22,” it said.

Van Dam stated that some leeway will be given to business owners which will allow them to decide whether or not to pass on higher pricing to customers.

Ikea’s statement comes after CEO Jesper Brodin stated in mid-October that port congestion was causing supply issues.

“We need to live with disturbances for the year to come,” he said.

Ikea has been forced to buy additional shipping capacity to address product shortages

(Adapted from NewsBreak.com)

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