IKEA is a Swedish multinational company that was founded in 1943 by 17-year-oldIngvar Kamprad. It is one of the world's largest privately held companies and has been the world’s largest furniture retailer since 2008.
The majority of IKEA outlets are controlled by the holding company Ingka Holding, which is owned by the Stichting Ingka Foundation. The Stichting Ingka Foundation is one of the largest charitable foundations in the world and is registered in the Netherlands. This complicated structuring helps IKEA minimize its taxes, makes a hostile takeover impossible, and permits the company to operateas a nonprofit corporation.
Key Takeaways
- IKEA is one of the world's largest privately held companies and has been the world’s largest furniture retailer since 2008.
- The complicated corporate structure of IKEA allows for its parent company—a nonprofit foundation—to minimize its taxes.
- In 2022, IKEA's net income fell by nearly 50% due to an increase in operational costs due to the COVID-19 pandemic.
- In 2023, the company announced its largest investment in the U.S. in four decades: $2.2 billion to add new stores and locations.
IKEA's Industry
IKEA operates in the home furnishings retail space and is the world's largest furniture retailer. The company is known for its Nordic design, ease of assembly of its furniture, low costs, and its large stores, which also include food stations.
IKEA's main competitors are Target, Walmart, Amazon, Wayfair, CB2, Pottery Barn, and Overstock. IKEA does not operate in the luxury space but seeks to offer well-designed furniture at affordable costs, which has been one of the reasons for its popularity.
IKEA's Financials
For fiscal year 2022, Inter IKEA Group had total revenues of €27.6 billion. Of this, sales of goods made up €26.1 billion and franchise fees made up €1.3 billion. Total revenue grew by 7.7% from fiscal year 2021, due to increases in sales of goods.
The company's net income for fiscal year 2022 was €710 million, a 50% decrease from €1.4 billion in fiscal year 2021. The reason is due to increases in the cost of goods sold and operating costs, the latter a result of disruptions, delays, and congestion in supply chains due to the COVID-19 pandemic.
History and Leadership
As noted, IKEA was founded in 1943 by Ingvar Kamprad. He started off by selling pens and wallets in his hometown of Småland in Sweden. His father gave him a small amount of money, and with that he started the roots of IKEA in 1948 by selling furniture.
In 1953, IKEA adopted the flatpack method of selling and delivering furniture to avoid high costs and high damage rates when delivering. From there, the company focused on keeping prices low due to high turnover and direct delivery.
In 1960, the company began expanding outside of Sweden with stores in Denmark and Norway. In the 1970s, it began expanding further, opening stores in Japan, Australia, Austria, Canada, Germany, Hong Kong, and Singapore, amongst others.
As mentioned previously, IKEA is owned by Ingka Holding, whose stated purpose is “to create a better everyday life for the many people. We do this by living our values of togetherness, simplicity, and responsibility—and by creating good and affordable home furnishing solutions. As we do this, we strive to make a positive impact on the planet by acting.”
The purpose of the group's structure—owning a holding company that controls the furniture outlets—is ultimately to minimize taxes. There is even an additional layer to the company's structure: its intellectual property and intangible assets, including its logo, are owned by a separate company.
IKEA's current CEO is Jon Abrahamsson Ring and its CFO is Martin van Dam.
Recent Developments
Ingka Holding has invested heavily in renewable energy. The group has committed to owning or owns 594 wind turbines, 22 solar parks in 18 countries, and over 1 million solar panels on the roofs of IKEA stores and warehouses.
In 2023, the company announced its renewable energy investment in Australia, which includes the purchase of two operational solar parks and a third in development.
In April of 2023, IKEA announced that it would be investing $2.2 billion in a growth strategy in the U.S. over the next three years. This will include new stores and new locations. This is its largest investment in the U.S. in four decades.
