News Feature | September 5, 2013

IKEA's New CEO Drops New Store Expansion Plan

Source: Retail Solutions Online
Sam Lewis

By Sam Lewis

Swedish furniture retailer will focus on year-over-year sales growth

Peter Agnefjall, the new CEO of the world’s largest furniture retailer, IKEA, said he will accelerate the rate of sales growth, but not necessarily through expansion. Last year, Agnefjall’s predecessor, Mikael Ohlsson, announced plans to open 20 to 25 new stores per year, after the company had previously held back on new store openings, and announced plans to double IKEA’s sales to near 50 billion euros by 2020.

Agnefjall, who became IKEA’s CEO on Sunday, stands by the target of doubling sales by 2020, but could not say the same for the pace of new store openings. The new CEO told Reuters he will achieve this goal through 5 percent sales growth per year in already open stores, and an additional 5 percent of growth in new stores. “That's not a particularly good measurement. A large store can turn around five times as much as a small store, and therefore it's not a relevant figure to talk about,” Agnefjall said. “That's why we want to drop it as a yardstick. It is not the primary one,” he said, regarding the new store opening target number. However, Agnefjall did agree with Ohlsson’s comments a year ago that the roll-out pace of new stores would accelerate.

The 2010/11 year brought seven new stores to IKEA, while during 2011/12 the Swedish retailer opened 11 new stores. Agnefjall plans to open 10 to 15 new stores during the 2013/14 campaign, after only opening five stores, three of which are in China, during 2012/13. IKEA also plans to open an additional three stores in China this year, as it hopes to make the Chinese market its biggest.

IKEA has just about doubled its sales in the last 10 years, up to 27.6 billion euros in 2011/12. Agnefjall credits this to strong sales numbers in North America, Russia, and China, as well as price cuts of nearly 1 percent in the last year, with plans to drop them another whole percent in the coming year. IKEA is scheduled to publish its annual earnings report early in 2014, so we should be able to gauge if the company is on track to double again by 2020.