Global housing worries hit Ikea

Posted Apr 9th 2008 3:21PM by Eliza Popescu
Filed under: Products and Services, Management, Consumer Experience, Housing

With people increasingly worried about the housing market and the credit crunch, it's not a surprise that many consumers are saving their money instead of buying furniture and investing in their houses. And given the current market conditions, it's no surprise that Swedish retail chain Ikea has seen its sales under pressure lately.

Anders Dahlvig, Ikea's chief executive, recently stated that the furniture retailer has been experiencing sales declines in some of its major markets, including Spain, Italy, and Germany. Moreover, the company expects the U.S. economic slowdown to affect other European markets as well. Both the global economic slowdown and higher energy and food prices have weighed on consumer confidence, contributing to the company's weak sales.

Even so, Ikea is not cancelling its expansion plans. The company believes that the weak market conditions lower not only its sales but also those of its rivals. "In bad times the competition is hurting as well and I feel it is an opportunity for Ikea," Dahlvig declared.

For the moment, is unclear if Ikea's plan will be successful. However, the company doesn't plan to expand its business in India due to the country's restrictive retail investment laws. A change in the legislation is expected, but for the moment the retailer will continue to rely on emerging markets as the best expansion ways.

Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.

Tags: Anders Dahlvig, AndersDahlvig, competition, credit crisis, CreditCrisis, furniture, housing, Ikea, recession, sales