IKEA owner Ingka Group sacrifices profit to cut prices and lead sustainability revolution

Ingka Group, the largest IKEA retailer, has reported a steep drop in net profit for fiscal year 2024, driven by its ambitious investments in affordability and sustainability. With net income falling from €1.51 billion in 2023 to €806 million, the company prioritised cutting prices for customers amidst economic pressures and advancing its environmental goals.

Affordability over profit

The group, which operates 90% of IKEA’s global retail sales, made a bold move by allocating €2.1 billion to price reductions. This decision aimed to counter rising living costs and attract price-conscious consumers. While the company’s revenue declined by 5.5% to €41.86 billion, visits to its physical stores grew by 3.3%, and online orders surged by 9%. These trends indicate strong consumer engagement despite the financial hit.

Deputy CEO and CFO Juvencio Maeztu stated that Ingka Group’s unique ownership structure enabled it to prioritise customer needs over short-term profits. He added that affordability remains a cornerstone of the company’s long-term strategy.

Sustainability efforts and reinvestment strategy

Sustainability is at the heart of Ingka Group’s operations, with the company reinvesting 85% of its net profit into business transformation projects. These include €3.4 billion in expenditures to enhance customer experiences, real estate development, and renewable energy adoption.

Maeztu emphasised that the company’s financial independence allowed it to stay resilient amid global economic uncertainties. He highlighted Ingka’s ongoing efforts to retrofit IKEA units with renewable heating and cooling technologies as part of its €1.5 billion renewable energy transition. The company’s goal to reduce its climate footprint by 85% by 2030 and achieve net-zero emissions by 2050 demonstrates its long-term commitment to environmental sustainability.

Charitable contributions through unique ownership model

The remaining 15% of Ingka Group’s profits is allocated to the Stichting INGKA Foundation, the sole owner of the company. These funds support the IKEA Foundation, which focuses on tackling poverty and climate change. By the end of 2023, the foundation had provided €2 billion in grants to its partners, making a significant impact on global philanthropy.

Global expansions and portfolio changes

Despite exiting the Russian market in 2023, where it sold 14 meeting places, Ingka Centres reported strong growth in Europe and China. Notable expansions included the opening of a Livat meeting place in Xi’an, China, and the acquisition of Churchill Square in Brighton, UK. The company also introduced innovative retail experiences, such as its plant-forward food hall in San Francisco.

Ingka Group’s fiscal year 2024 highlights a delicate balance between profitability, affordability, and sustainability. By prioritising long-term resilience over immediate financial gains, the company has positioned itself as a leader in sustainable retail while maintaining its commitment to serving its customers and the planet.