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Ikea joins H&M and Spotify in suspending operations in Russia

Swedish furniture giant Ikea announced on Thursday it would suspend its activities in Russia and Belarus, affecting nearly 15,000 employees, 17 stores and three production sites, in response to the war in Ukraine.

Ikea joins H&M and Spotify in suspending operations in Russia
File photo of an Ikea store in Stockholm. Photo Janerik Henriksson/TT

“The war has had a huge human impact already. It is also resulting in serious disruptions to supply chain and trading conditions. For all of these reasons, Ikea has decided to temporarily pause operations in Russia,” the company said in a statement to AFP.

The suspension mainly concerns Russia, where the Swedish group has been present since 2000 and is one of the largest Western employers.

Operations in Belarus would also be halted, though the country hosts only a few suppliers and has no shops, according to Ikea.

“The devastating war in Ukraine is a human tragedy, and our deepest empathy and concerns are with the millions of people impacted,” the company said.

“These decisions have a direct impact on 15,000 Ikea co-workers, and the company groups will secure employment and income stability and provide support to them and their families in the region,” Ikea said.

While the stores operated by the Ingka group account for the bulk of the workforce affected, 12,000 people, Ikea also has nearly 2,500 employees working in manufacturing, with three factories in Russia.

According to the company, 47 suppliers in Russia and 10 in Belarus, would be affected by the decision, which also puts a stop to imports and exports between the two countries.

Prior to this announcement, Ikea had initially announced that it would leave its shops in Russia open, which was met with criticism in Sweden.

Several other Swedish companies have already halted their Russian operations over the war and sanctions imposed on Russia.

On Monday, Swedish truck maker Volvo said it was stopping sales and halting production at its Kaluga plant, and telecoms giant Ericsson also said it would halt deliveries to Russian clients. On Wednesday, Swedish clothing giant H&M said that it would halt all sales in its Russian stores.

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BUSINESS

‘I was too ambitious’, says Spotify CEO as tech giant cuts 6 percent of workforce

Spotify founder Daniel Ek said he had been 'too ambitious' as the Swedish streaming giant on Monday announced it is cutting six percent of its approximately 10,000 employees.

'I was too ambitious', says Spotify CEO as tech giant cuts 6 percent of workforce

The company did not specify where the cuts will be made.

“In hindsight, I was too ambitious in investing ahead of our revenue growth. And for this reason, today, we are reducing our employee base by about  six percent across the company,” Spotify chief executive Daniel Ek said on Spotify’s official blog.

“I take full accountability for the moves that got us here today,” Ek added.

The 39-year-old CEO added that over the next several hours “one-on-one conversations will take place with all impacted employees.”

He said HR business partners are working with employees whose immigration status is connected with their employment.

Shares in the Sweden-based company, which is listed on the New York Stock Exchange, rose over 4.5 percent following the announcement in out-of-hours trading.

Spotify has invested heavily since its launch to fuel growth with expansions into new markets and, in later years, exclusive content such as podcasts.

It has invested over a billion dollars into podcasts alone and raised hackles last year as it signed a $100 million multi-year deal with controversial star podcaster Joe Rogan.

The company has never posted a full-year net profit despite its success in the online music market.

In 2017, the company had around 3,000 staff members, more than tripling the figure to around 9,800 at the end on 2022.

It planned to reach 479 million monthly active users by the end of 2022, including 202 million paying subscribers and is targeting one billion users by 2030.

“While I believe this decision is right for Spotify, I understand that with our historic focus on growth, many of you will view this as a shift in our culture,” Ek said.

‘Unsustainable’

To offer perspective, Ek noted that the growth of the company’s operating expenditure had outpaced revenue growth by a factor of two.

“That would have been unsustainable long-term in any climate, but with a challenging macro environment, it would be even more difficult to close the gap,” Ek said.

The company’s annual turnover reached 9.6 billion euros ($10.4 billion) in 2021.

Reporting its third quarter earnings in October, Spotify said it had 456 million monthly active users, of which 195 million were paying subscribers – who account for the majority of Spotify’s income.

In recent months, tech giants such as Google parent company Alphabet, Facebook-owner Meta, Amazon and Microsoft have announced tens of thousands of job cuts as the sector faces economic headwinds.

On Friday, Alphabet announced it would cut 12,000 positions, just a day after Microsoft announced a cut of 10,000.

The cuts in the tech sector follow a major hiring spree during the height of the coronavirus pandemic when companies scrambled to meet demand as people went online for work, school and entertainment.

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