Higher supply costs weigh on Ikea's profits

Inter Ikea Group, the company that operates the brand and franchise business of the Swedish furniture giant, reported a drop in annual profits on Wednesday, weighed down by higher material and transport costs.

The company's net profit for its full year accounting period -- running from September 2020 to August 2021 -- fell 17 percent to 1.4 billion euros ($1.6 billion).

Operating profit was also down 17 percent, at 1.7 billion euros, mainly driven by higher costs related to the Covid-19 pandemic, the company said.

"The biggest cause was the steep increase in transport and raw material prices in the second half of the financial year," Inter Ikea said in a statement.

Container transport prices are at record levels following the outbreak of the pandemic, which has disrupted maritime logistics.

At the same time, the brand's best-sellers, such as its Pax wardrobes and Billy bookcases, have been particularly affected by the ongoing freight and supply turmoil.

Ikea warned in October that supply issues would plague its business well into 2022.

Despite these issues, Inter Ikea, which accounts for about two-thirds of Ikea group of companies' total revenue in its results, reported higher sales for the year at 25.6 billion euros, up eight percent.

Overall, Ikea shops reported total sales of 41.9 billion euros for the 2021 financial year, up six percent, according to figures announced in mid-October.

Ikea, founded in 1943 in southern Sweden, is not listed on any stock exchange and is therefore not required to publish its financial results but began doing so in 2010.