Inter IKEA GroupFinancial SummaryFY19Inter IKEA Group
IntroductionThis document summarises Inter IKEA Group’s financial performancefor financial year 2019 (FY19). FY19 is the period from 1 September 2018to 31 August 2019.FY19 has been a successful year for the IKEA franchise system.Retail sales grew by 6.5% compared to FY18. Total retail sales, whichincludes sales of IKEA products, food and services to IKEA customers,amounted to EUR 41.3 billion. 12 new IKEA stores opened around theworld, and nine markets introduced e-commerce. Around 2.8 billionpeople visited the IKEA website, and e-commerce sales grew by 43%.Retail sales growth means positive results for Inter IKEA Group, whichincludes the IKEA franchisor, range, supply and certain industryactivities. Inter IKEA Group reached total revenues of EUR 25.3 billionand a net profit of EUR 1.5 billion in FY19.Retail sales per area of the homeRetail salesRetail sales per type1%19% 41.3 6.5%billion retail salesIn February a new commercial theme began. “Get ready for life” putthe bedroom and bathroom in focus, including lots of new products aswell as some old favourites. The PLATSA open wardrobe system andKUNGSBLOMMA bedroom textiles were popular new families. “Getready for life” continues until August 2020.7%2.834%growth ratebillion websitevisits22%92%5%5%2 Inter IKEA Group Financial Summary 201915%1 billion store visitsand 12 new stores worldwideLiving roomBed & bathroomKitchen & diningChildren’s IKEAIKEA foodOthersE-CommerceNew stores FY19Existing stores
The IKEAfranchise systemIKEA is a franchise business. That meansmany people and companies with differentowners work under one IKEA brand,dedicated to one IKEA vision: to create abetter everyday life for the many people.The diagram on the next page shows asimplified overview. Inter IKEA Systems B.V.,IKEA of Sweden AB, IKEA Supply AG and IKEACommunications AB are part of Inter IKEAGroup. IKEA Industry – also part of Inter IKEAGroup – is not shown since they are an IKEAsupplier. IKEA Supply AG works with themand other suppliers to supply the IKEA range.Franchising is a system that encourageseveryone to contribute and collaborate. Thefranchisor is responsible to continuouslydevelop the IKEA Concept and ensure itsimplementation in new and existing markets.Franchisees provide valuable input based onconsumer and market insights.3 Inter IKEA Group Financial Summary 2019Expansion and retaildevelopmentThe franchise system enables steadygrowth while developing the IKEA conceptand laying a solid foundation for the IKEABrand. Continuous growth enables greatereconomies of scale. This makes it possible tokeep prices low and ultimately reach manymore people around the world.This year the companies in the franchisesystem worked together to launch morethan 2,000 new products, develop new waysto make shopping more convenient, andhelp more than 800 million people to livehealthier, more sustainable lives.This year 12 new IKEA stores opened aroundthe world. Together 433 stores in more than50 markets welcomed over 1 billion visitors.IKEA retailers also opened several small testlocations. Among the new locations was IKEALa Madeleine. Located in the centre of Paris,nearly two million people can reach it bypublic transport within 20 minutes. It’s also thesmallest IKEA store in Paris at just 5,400 squaremetres (nearby IKEA Paris Nord is more than32,000 square metres).These new developments are part of a “totalmarket approach” to become more accessiblefor IKEA customers. Rather than think aboutthe stores and website separately, IKEA retailersconsider everything about how people in aparticular market like London or Tokyo interactwith the IKEA brand. Then they identify newways to inspire customers, and make shoppingand getting IKEA products home even easier.IKEA retailers will continue to move closer topeople all over the world. During the comingyears new IKEA stores and e-commerce willopen in Macau, Puerto Rico, Chile, Colombia,Peru, Mexico, Estonia, Ukraine, New Zealand,Slovenia, Vietnam and the Philippines.
Overview of the IKEA franchise systemIKEA franchisorIKEA franchiseesFranchise agreementsInter IKEASystems B.V.375 stores10 storesDairy FarmIkanoHouse MarketMAPAAl-SulaimanSartonAl-FuttaimNorthern BirchAl-HomaiziMiklatorgFalabellaIngka1 storeAssignments7 stores7 stores8 stores6 storesIKEA assignmentsIKEA ofSweden ABIKEACommunicationsABIKEASupply AG5 storesSupply agreements3 stores4 stores3 stores4 storesCatalogue agreementsThe list above refers, in a simplified way, to companies/groups of companies operating IKEA retailbusinesses in one or more markets. The listed names do not represent the legal company nameof the franchisee companies that have entered into franchise agreements with Inter IKEA SystemsB.V. Store numbers are correct as per 31 August 2019. In addition to the stores listed above, IKEAfranchisees also operate several test locations.4 Inter IKEA Group Financial Summary 2019
Inter IKEA GroupInter IKEAHolding B.V.FranchiseInter IKEA SystemsB.V.Range & SupplyIKEA ofSweden ABInter IKEA Group is the group of companiesthat connects IKEA franchisees with rangedevelopment and suppliers, and aligns theoverall IKEA strategic direction. All to createa better everyday life for the many people.IKEA franchisees buy their products fromInter IKEA Group companies, and theypay a franchise fee based on their annualretail sales.5 Inter IKEA Group Financial Summary 2019IndustryIKEASupply AGIKEAIndustry ABThe Group consists of three core businesses:Franchise, Range & Supply and Industry.The three core businesses work togetherwith franchisees and suppliers to co-createan even better IKEA offer and franchisesystem. Inter IKEA Group aims to provide thebest possible conditions for implementingand operating the IKEA Concept, and tocreate a strong platform for growth.Core Business FranchiseCore Business Franchise consists of InterIKEA Systems B.V. and its subsidiaries.Inter IKEA Systems licenses the IKEA retailsystem and trademarks to IKEA franchiseesworldwide.Core Business Franchise continuouslydevelops the IKEA Concept to ensure itssuccessful implementation in new andexisting markets. This enables IKEA to remainforward-looking in areas such as branddevelopment, sustainability, peopleand environment, market potentialand expansion.
Manufacturing anddistributionThis year Inter IKEA Group broke ground ona 100,000 square metre distribution centre inKuala Lampur, Malaysia. The new centre willmanage an inventory of 7,000 IKEA productsannually and serve IKEA operations in Malaysia,Singapore, Thailand, Indonesia and India. Itwill also have the capacity to serve additionalmarkets in the future, including the plannedstore in Manilla, the Philippines.In Lithuania, the Inter IKEA Group facility inKazlų Rūda is doubling production capacity,and a new components factory in Nantong,China is nearing completion. These factorieswill incorporate the latest manufacturingtechnology to improve efficiency, qualityand sustainability.Inter IKEA Group also sold two facilities toimprove efficiency and meet changing needs.P3G Industries completed purchase of theInter IKEA Group factory in Lure, France, inJanuary 2019. The following month Bamptonfinalized acquisition of the Inter IKEA Groupfactory in Skoczow, Poland. And in October itwas announced that Morgan Olson is to opennew production in the Inter IKEA Group facilitiesin Danville, USA. The handover will take placeduring early 2020.6 Inter IKEA Group Financial Summary 2019Core Business Range & SupplyCore Business Range & Supply is responsiblefor developing and supplying the globalIKEA range.Range & Supply works throughout thewhole value chain. They include IKEA ofSweden AB, IKEA Communications AB, IKEASupply AG and related businesses.IKEA of Sweden is responsible fordeveloping and designing the overall IKEAproduct range – including home furnishingsand food. IKEA Communications AB isthe communication agency that createsand produces IKEA communication forcustomers and other IKEA organisations.IKEA Supply procures IKEA products, andthen supplies these products to IKEAretailers around the world.Core Business IndustryCore Business Industry manufactures IKEAhome furnishing products and developsunique IKEA capabilities and capacities inrelevant parts of the value chain (e.g. material,manufacturing and distribution).Industry produces approximately 12% ofthe total IKEA range, with its main focus onfurniture. They operate 38 production unitsincluding forestry, sawmills, and production ofboard material, wood components and readyfurniture.Other functionsTo support the core businesses, Inter IKEAGroup includes group functions for finance,communication, digital, people and culture.IKEA Älmhult AB, which owns and operatesthe IKEA Hotell and Museum, is also part ofInter IKEA Group.OwnershipInter IKEA Group (Inter IKEA Holding B.V. andall its subsidiaries) is ultimately owned byInterogo Foundation, based in Liechtensteinand established in 1989. Interogo HoldingAG is a co-shareholder, contributingcapital and loans to Inter IKEA Group.Interogo Foundation is the sole controllingshareholder in Inter IKEA Holding B.V.
Inter IKEA GroupFY19 financial resultsInter IKEA Group’s financial performance was stable in FY19. Grossprofit was slightly less than in FY18 due to higher costs for materials,transport and logistics. Combined with flat operational costs, thisresulted in lower operating income. The decrease was offset byimproved financial income and expenses. Income taxes increased to17%, resulting in net income of EUR 1,485 million.The Inter IKEA Group consolidated income statement shows asimplified overview of this year’s financial performance.Sales of goodsSales of goods refers to bulk sales of IKEA products to IKEAfranchisees. Inter IKEA Group also owns and operates one IKEA storein Delft, the Netherlands. IKEA Delft’s retail sales are also included inthis line item.IKEA franchisees purchased more than 39.2 million cubic metresof IKEA products from Inter IKEA Group in FY19, compared to 38.4million cubic metres in FY18. Together with increased sales prices,this contributed to increased sales of goods.7 Inter IKEA Group Financial Summary 2019Consolidated income statementin millions of EURFY19FY18Sales of goods23,98623,651Franchise fees1,1951,200Other income7368Total revenues25,25424,919Cost of goods sold20,70320,228Gross profit4,5514,691Operational cost2,6952,729Total operating ,449Financial income and expenseTotal income before taxesIncome taxesLosses from the sale of entitiesNet income
Franchise feesIn a franchise setup, one company paysanother franchise fees for the right touse their intellectual property. The IKEAfranchise offer includes the IKEA trademarkand IKEA concept.IKEA franchisees pay Inter IKEA Group anannual fee of 3% over their net sales. Inreturn, they are authorised to market andsell the IKEA product range and operateIKEA stores and other sales channels.Although retail sales went up in FY19,franchise fee income remained roughly thesame due to fluctuating currencies.Operational cost per category34%46%Depreciationand amortisation8 Inter IKEA Group Financial Summary 2019Cost of goods soldCost of goods sold describes the totalaccumulated costs to manufacture anddistribute products.The cost of goods sold relates to bothwholesale and Delft store sales. Inter IKEAGroup manufactures about 12% of the IKEArange and sources the remaining 88% fromnearly 1,000 external suppliers. This includesboth home furnishing and food products.E-commerce sales created increasedcosts for packaging and logistics in FY19.Increased raw material prices, tariffs andimport duties also affected costs, althoughraw material prices decreased during thesecond half of the year.20%Staff CostsOther incomeOther income mainly consists of incomefrom selling the IKEA catalogue and othermarketing materials created for IKEAretailers including the IKEA Delft store.Other operatingcostsOperational costOperational cost includes staff costs,utilities, rent and other costs related to dayto-day operations.Range developmentSmart home products have recently becomean important part of the IKEA range. This yearInter IKEA Group introduced smart lighting,blinds and SYMFONISK – a new collectioncreated together with SONOS; on the first dayalone more than 30,000 SYMFONISK lampsand speakers had been sold. And in Augusta new business unit was established toaccelerate smart home product development.SYMFONISK is one of many collectionsdeveloped in collaboration withestablished brands, start-ups, studentsand social entrepreneurs.Ori, an American start-up, worked with productdevelopers to create the new ROGNAN roboticfurniture, which debuts in Hong Kong andJapan next year. Other collaborations includeUNYQ and Area Academy, Greyhound OriginalBangkok and Zandra Rhodes.IKEA product developers and supplyspecialists have also worked to make theIKEA range climate positive and regenerateresources. For example, the FÖRANDRING andMUSSELBLOMMA collections are respectivelymade from agricultural waste and recycledplastic (including plastic waste collected in theMediterranean Sea by Spanish fishermen).
Staff costs mainly consist of salaries, benefits, training and socialcosts. As per 31 August 2019 Inter IKEA Group employed 26,227 fulltime equivalent co-workers, compared to 26,504 in FY18. Changesare mainly due to restructuring and the sales of factories.Operational costs also include expenses to develop new productsand solutions. The costs related to our development and innovationportfolios amounted to EUR 175 million in FY19. Part of thisinvestment went to develop products that help people live moresustainable lives and reduce the IKEA climate footprint.More than half of the IKEA climate footprint comes from the materialin the products and the production process. To transform into a lowcarbon business, IKEA is moving towards recycled and renewablematerials and is pushing for more lightweight construction. In FY19this required significant investments to transform the supply chain,sourcing and product development.Financial income and expenseFinancial income and expense is revenue and costs regardingloans, investments and positions in foreign currencies. Inter IKEAGroup paid less interest following repayment of long-term loansin FY19. Favourable currency developments partly offset theinterest expenses.Income taxesThis year the Inter IKEA Group tax charge was EUR 301 million,around EUR 45 million more than last year. This equals 17% of pretax income, compared to 15% in FY18. Inter IKEA Group operatesin several countries, with its main activities in the Netherlands,Sweden and Switzerland. As a result most income tax is paid inthese countries.Losses from sales of entitiesLosses from sales of entities mainly consists of a loss connected to thesale of the Inter IKEA Group production facility in Lure, France.Inter IKEA Group also worked closely with retailers to develop newand different ways to shop the IKEA product range – online, inremote locations and in city centres (e.g. IKEA La Madeleine in Paris).This includes new locations closer to where people live, work andsocialise. It also includes a wider range of flexible and affordableservices to make shopping more convenient for IKEA customers. 1.5billion FY19net profit9 Inter IKEA Group Financial Summary 2019
Inter IKEA Groupbalance sheetThe Inter IKEA Group financial position improved during FY19.Inventories and debts went down, and the equity ratio increasedfrom 34% to 39%. The consolidated balance sheet shows an overviewof Inter IKEA Group’s assets and what is due to shareholders,suppliers, partners and other organisations.Intangible fixed assetsIn general terms, fixed assets are business property intended forlong-term use. Intangible fixed assets are assets that lack physicalform like patents, concepts and intellectual property. Intangible fixedassets form much of Inter IKEA Group overall assets.Most Inter IKEA Group intangible fixed assets are so-calledproprietary rights for the IKEA trademarks, intellectual property andcatalogue. Inter IKEA Group purchased these rights for EUR 11.8billion. As a positive return is expected for a long period, these costsare spread over a period of 45 years, which started in 2012. Thiscommon practice, called amortisation, makes it easier to compareyearly income with expenses.10 Inter IKEA Group Financial Summary 2019Consolidated balance sheetin millions of EUR31 Aug 201931 Aug 201810,35510,700Tangible fixed assets1,6631,618Financial fixed ,298705578Non-current liabilities6,4877,068Current liabilities5,9806,538Total liabilities13,17214,184Equity and liabilities21,47021,482Intangible fixed assetsTotal fixed assetsCash and cash equivalentsTotal current assetsTotal assetsGroup equityProvisions
Tangible fixed assetsTangible fixed assets are things like real estate and equipment thatyou can physically touch and feel. Inter IKEA Group tangible fixedassets are mainly factories and distribution centres.Group equity, provisions and liabilitiesEquity is the capital invested by shareholders of the Inter IKEAGroup plus accumulated profits over time. Equity increased withEUR 1 billion during FY19.Inter IKEA Group owns several offices and distribution centres,the IKEA Delft store, the IKEA Hotell and Museum, and around 40factories. Most of the factories are in Europe. The majority produceIKEA furniture, and two produce components like screws andwooden dowels used to assemble IKEA furniture.Of the EUR 1,485 million profit achieved during FY19, EUR 850 millionThis year Inter IKEA Group sold two factories and closed one other.In most cases co-workers have remained in the same factories undernew ownership or moved to new jobs in other nearby factories withsupport from the Inter IKEA Group.Inventories and receivablesInventories mostly consist of IKEA products in warehouses. Last yearinventory levels were higher than normal due to lower than expectedsales. Inter IKEA Group took measures this year to lower inventorylevels, reducing their overall value.Receivables is money owed to the Inter IKEA Group by businesspartners. Most receivables are for franchise fees and products soldand invoiced to IKEA franchisees.will be distributed as a dividend to Interogo Holding AG. Theremaining EUR 635 million will be added to Inter IKEA Group equity.Provisions are money set aside for pension commitments, deferredtaxes and claims. Liabilities are money owed to others. Most InterIKEA Group non-current liabilities, which are due over a long periodof time, consist of loans from Interogo Holding AG (a non-controllingshareholder). As in FY19, Inter IKEA Group will continue to repay EUR500 million each year. Current liabilities are short-term loans, moneydue to suppliers and the current portion of long-term loans fromInterogo Holding AG.4.3billion in inventoriesin FY194.6billion in inventoriesin FY18Note to reader: the included abbreviated financial statements are an abridged version of the consolidated financial statements of Inter IKEA Holding B.V. as included in the AnnualReport for the financial year 2019. An unqualified auditor’s report dated 7 November 2019 was issued on these financial statements. Inter IKEA Holding B.V.’s consolidated financialstatements, from which these abbreviated financial statements have been derived, have been prepared in accordance with Part 9 of Book 2 of the Dutch Civil Code.11 Inter IKEA Group Financial Summary 2019
Inter IKEA Systems B.V. 2019Inter IKEA Group Financial Summary FY19In FY19 IKEA retailers saw continued growth despite a challenging andchanging retail environment. Strong retail sales mean positive results forInter IKEA Group. Inside, learn more about IKEA and Inter IKEA Group financialperformance for the year that has passed.For further information visit About.IKEA.comReleased 25 September 2019Released 8 November 2019Inter IKEA GroupFinancial SummaryFY19Coming early 2020Inter IKEAHolding B.V.Annual ReportFY19Inter IKEA GroupInter IKEA Holding B.V.IKEA Highlights 2019Inter IKEA Group FinancialSummary FY19Inter IKEAGroup AnnualReport FY19Inter IKEAHolding B.V.List of subsidiariesFY19Inter IKEA Holding B.V.Inter IKEA GroupList of subsidiariesFY19Inter IKEA GroupThe IKEA logo and the IKEA wordmark are registered trademarks of Inter IKEA Systems B.V. All copyrights in the pictures used in this document are owned by Inter IKEASystems B.V. and may in no way be copied or reproduced without the consent of Inter IKEA Systems B.V.12 Inter IKEA Group Financial Summary 2019IKEA Sustainabilitysummary FY19
Inter IKEA Group is the group of companies that connects IKEA franchisees with range development and suppliers, and aligns the overall IKEA strategic direction. All to create a better everyday life for the many people. IKEA franchisees buy their products from Inter IKEA Group companies, and they p