Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

IKEA temporarily closes stores in Russia, flags bigger price hikes

Published 03/03/2022, 06:08 AM
Updated 03/03/2022, 11:31 AM
© Reuters. FILE PHOTO: The company's logo is seen outside of an IKEA Group store in Saint-Herblain near Nantes, France, March 22, 2021. REUTERS/Stephane Mahe

© Reuters. FILE PHOTO: The company's logo is seen outside of an IKEA Group store in Saint-Herblain near Nantes, France, March 22, 2021. REUTERS/Stephane Mahe

By Anna Ringstrom

STOCKHOLM (Reuters) - IKEA, the world's biggest furniture brand, is closing its stores in Russia and pausing all sourcing in the country and ally Belarus, joining the wave of Western firms curbing business with Russia after its invasion of Ukraine.

The news, announced on Thursday, came as IKEA store owner Ingka Group's retail manager told Reuters the budget furniture maker now expected to raise prices by an average of 12% this fiscal year, up from 9% flagged previously amid soaring raw material costs and supply chain disruptions.

"The devastating war in Ukraine is a human tragedy, and our deepest empathy and concerns are with the millions of people impacted," brand owner Inter IKEA and Ingka Group said in a joint statement.

"The war has both a huge human impact and is resulting in serious disruptions to supply chain and trading conditions, which is why the company groups have decided to temporarily pause IKEA operations in Russia," they said.

Ingka Group, which is also one of the world's biggest shopping centre owners, said its 14 malls in Russia, branded "Mega", remain open.

While a raft of international companies have already halted operations in Russia due to the war and consequent sanctions against the country, IKEA is one of the first to also halt business with Belarus.

"We couldn't offer safety and security of people working in our supply chain - passing the border et cetera was simply too risky. Then, on top of that, the consequences of different sanctions altogether made it simply not possible to operate any longer," Inter IKEA Core Business Supply Manager Henrik Elm told Reuters regarding Belarus.

Inter IKEA is in charge of supply while Ingka Group is the main global retailer with 17 stores in Russia and one distribution centre. In the year through last August, Russia was IKEA's 10th-biggest market with retail sales of 1.6 billion euros ($1.8 billion), or 4% of total retail sales.

The decision to pause operations in Russia affects 15,000 employees and Ingka Group Retail Operations Manager Tolga Oncu said in a joint interview with Elm that all staff would get paid, in roubles, for at least the coming three months.

"The company groups will secure employment and income stability and provide support to them and their families in the region," IKEA said.

IKEA produces chipboards and wood based products at three sites in Russia, and has around 50 direct suppliers in the country that produce a wide range of goods. The bulk of products made in Russia are sold in Russia.

Goods produced in Russia and exported to other markets make up less than 0.5% of IKEA's products. Most goods produced in Belarus, which is purely a sourcing market for IKEA, are sold in Russia and consist primarily of wood-based products and mattresses and sofas.

Elm said the decisions were made before the European Union on Wednesday approved new sanctions against Belarus for its supporting role in Russia's invasion of Ukraine.

Elm said it was too early to say whether Inter IKEA would raise prices further to store owners as a result of the Ukraine crisis.

© Reuters. FILE PHOTO: The company's logo is seen outside of an IKEA Group store in Saint-Herblain near Nantes, France, March 22, 2021. REUTERS/Stephane Mahe

Russia calls its actions in Ukraine a "special operation."

($1 = 0.9028 euros)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.