Budget furniture retailer IKEA is sticking to planned price cuts despite Red Sea shipping disruptions pushing up costs, and has sufficient stocks to absorb any supply chain shocks, it said on Monday ahead of the World Economic Forum’s annual meeting.
“Our commitment is to make sure that we prioritize investing in lower prices for our customers,” Jesper Brodin, CEO of Ingka Group, which owns most IKEA stores worldwide, told the Reuters Global Markets Forum in the Swiss ski resort of Davos.
Ingka Group has invested more than €1-billion ($1.1-billion) in price reductions across its markets from September to November, and aims to continue lowering prices in 2024.
Attacks on ships by Houthi militants in Yemen, who say they are acting in solidarity with Palestinians, have disrupted global commerce with shipping giants rerouting vessels around the southern tip of Africa, a longer and more expensive journey.
Higher transport costs have spurred fears of new inflationary pressures just as consumers were getting some relief from prices starting to come down.
But Ingka Group’s Brodin said he still sees “quite significant deflation” upstream in its supply chain.
While lowering product prices may hurt profits, Brodin said IKEA tends to take market share when consumers are under financial pressure.
“This is not a year for us to optimize profits,” he said, adding: “This is a year to try to navigate on a thinner profit, but to make sure that we support people.”
IKEA also plans to expand its presence in China and India, Brodin added, saying that the retailer has seen a Chinese rebound.