Unprecedented job cuts at Ikea due to crisis

Unprecedented job cuts at Ikea due to crisis
Swedish discount furniture retailer Ikea has been forced to slash 5,000 jobs globally due to the economic crisis, but still expects a new sales record, the CEO said on Tuesday.

The unlisted family-owned company expects sales of €21.5 billion ($30.1 billion) excluding currency effects for its fiscal year ending August 31, managing director Anders Dahlvig told Swedish financial daily Dagens Industri.

Dahlvig, who will step down on September 1 and pass the baton to Mikael Olsson, provided no detailed earnings figures for this year, but said the do-it-yourself company founded in 1943 would post a strong profit despite the worst global recession since World War II.

“We have never had to implement such massive job cuts before…. But it is completely necessary to adapt our costs and our capacity to demand, which is weaker than we expected,” Dahlvig said without disclosing where the jobs were slashed.

“For example, in the previously rapidly-expanding Chinese market there is virtually no growth,” he added.

He said Ikea was caught off guard by the severity of the economic crisis.

“The sharp downturn of the economy has really surprised us. This downturn is very closely linked to the housing sector and is therefore even worse for our industry. Home decorating has plunged much more than the retail sector in general,” he said.

Despite that, “thanks to our low-cost profile we are doing better than most and are now gaining market share,” Dahlvig said.

The company had initially expected sales to drop by 11 percent this year.

But so far sales have fallen by just one percent, and thanks to billions of dollars invested in opening new stores the company now expects sales to rise by three percent to the above-mentioned €21.5 billion.

Dahlvig said Ikea’s coffers were full and the company would continue to invest heavily despite the downturn.

This year the company plans to open 14 new stores, an investment worth some 12 billion kronor ($1.5 billion), he said.

And new staff will be needed for those stores, so Ikea expects its number of employees worldwide to remain at around 130,000 despite the cutbacks.

Because Ikea is an unlisted, privately-owned company it does not release regular earnings reports.

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