IKEA temporarily closes stores in Russia and announces major price increases

FILE PHOTO: The company's logo can be seen outside an IKEA Group store in Saint-Herblain, near Nantes
FILE PHOTO: The company’s logo is seen outside an IKEA Group store in Saint-Herblain near Nantes, France, March 22, 2021. REUTERS/Stephane Mahe

March 3, 2022

By Anna Ringstrom

STOCKHOLM (Reuters) – IKEA, the world’s largest furniture brand, is closing its stores in Russia and halting all sourcing in the country and ally Belarus, joining a wave of Western firms curbing business with Russia following its invasion of Ukraine.

The news announced on Thursday came as the retail manager of IKEA business owner Ingka Group told Reuters that the budget furniture maker now expects prices to increase by an average of 12% this fiscal year, up from 9% previously indicated on rising raw material costs and supplies became chain breaks.

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

“The war is having a huge human impact and causing serious disruptions to the supply chain and trading conditions, which is why the business groups have decided to temporarily suspend IKEA 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 will remain open.

While a number of international companies have already ceased operations in Russia due to the war and resulting sanctions against the country, IKEA is one of the first to have also ceased business with Belarus.

“We couldn’t offer security to the people working in our supply chain – crossing borders and stuff like that was just too risky. In addition, the overall consequences of various sanctions made it simply impossible to continue operating,” Henrik Elm, supply manager for Inter IKEA’s core business, told Reuters in reference to Belarus.

Inter IKEA is responsible for delivery, while Ingka Group is the largest global retailer with 17 stores in Russia and a distribution center. In the year to 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 stop operations in Russia affects 15,000 employees, and Tolga Oncu, retail operations manager at Ingka Group, said in a joint interview with Elm that all employees would be paid in rubles for at least the coming three months.

“The business groups will ensure employment 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 producing a wide range of goods. Most of the products made in Russia are sold in Russia.

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

Elm said the decisions were taken before the European Union on Wednesday approved new sanctions against Belarus over its supportive role in Russia’s invasion of Ukraine.

Elm said it’s too early to say if Inter IKEA will continue raising prices for shopkeepers because of the Ukraine crisis.

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

($1 = 0.9028 euros)

(Reporting by Anna Ringstrom; Editing by Mark Potter and Susan Fenton) IKEA temporarily closes stores in Russia and announces major price increases

Caroline Bleakley

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