IKEA temporarily closes stores in Russia, reports bigger price hikes

The company logo is seen outside an IKEA group store in Saint-Herblain near Nantes, France, March 22, 2021. REUTERS/Stephane Mahe

STOCKHOLM, March 3 (Reuters) – IKEA, the world’s biggest furniture brand, is closing its stores in Russia and suspending all supplies to the country and Belarusian ally, joining the wave of Western companies holding back business with Russia after his invasion of Ukraine.

The news, announced on Thursday, came as IKEA store owner retail director Ingka Group told Reuters the budget furniture maker is now set to raise prices by an average of 12% over this fiscal year, versus 9% previously reported amid soaring raw material and supply costs. chain disturbances. Read more

“The devastating war in Ukraine is a human tragedy, and our deepest empathy and concern goes out to the millions affected,” brand owner Inter IKEA and Ingka Group said in a joint statement.

“The war has both a huge human impact and is causing severe disruption to the supply chain and business conditions, which is why business groups have decided to temporarily suspend IKEA’s operations in Russia,” they said.

Ingka Group, which is also one of the world’s largest mall owners, said its 14 “Mega”-branded malls in Russia remain open.

While a large number of international companies have already halted their activities in Russia due to the war and the resulting sanctions against the country, IKEA is one of the first to also halt its activities with Belarus. Read more

“We couldn’t offer the safety and security of people working in our supply chain – crossing the border etc was just too risky. Then on top of that the consequences of different sanctions made it just impossible to operate longer,” Henrik Elm, Inter IKEA’s core business sourcing manager, told Reuters of Belarus.

Inter IKEA is in charge of supply while Ingka Group is the main global distributor with 17 stores in Russia and a distribution center. In the year ending last August, Russia was IKEA’s 10th largest market with retail sales of 1.6 billion euros ($1.8 billion), or 4% of total retail sales.

The decision to suspend operations in Russia affects 15,000 employees and Ingka Group’s retail operations manager, Tolga Oncu, said in a joint interview with Elm that all staff would be paid, in rubles, for at least the next three months.

“The business groups will provide job and income stability and support them and their families in the region,” IKEA said.

IKEA produces chipboard and wood-based products at three locations in Russia and has around 50 direct suppliers in the country that produce a wide range of products. Most of the products made in Russia are sold in Russia.

Goods produced in Russia and exported to other markets account for less than 0.5% of IKEA’s products. Most of the goods produced in Belarus, which is purely a supply market for IKEA, are sold in Russia and consist mainly of wood products, mattresses and sofas.

Elm said the decisions were made before the European Union on Wednesday approved new sanctions against Belarus for its supporting role in Russia’s invasion of Ukraine. Read more

Elm said it was too early to say whether Inter IKEA would raise prices further for store owners in the wake of the Ukraine crisis.

Russia calls its actions in Ukraine a “special operation”. Read more

($1 = 0.9028 euros)

Reporting by Anna Ringstrom Editing by Mark Potter and Susan Fenton

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