IKEA Temporarily Closes Stores In Russia, Notes Larger Price Increases

STOCKHOLM, March 3 – IKEA, the world’s largest furniture brand, is closing its stores in Russia and cutting off all supplies to the country and ally Belarus, joining a wave of Western companies restricting business with Russia following its invasion of Ukraine. .

The news, announced Thursday, came after manager retail owner of IKEA Ingka Group told Reuters, it is now expected producer of budget furniture to raise prices by an average of 12% this fiscal year, compared with 9% noted earlier amid rising raw material costs and supply chain disruptions. Read more

“The devastating war in Ukraine is a human tragedy and our deepest empathy and concern is for the millions affected,” Inter owner IKEA and Ingka Group said in a joint statement.

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“The war has both a huge human impact and serious disruptions in the supply chain and trade conditions, which is why groups of companies have decided to temporarily suspend IKEA’s operations in Russia,” they said.

Ingka Group, which is one of the largest owners of shopping centers in the world, said its 14 malls in Russia, called “Mega”, remain open.

While many international companies have already stopped its activities in Russia because of the war and subsequent sanctions against the country, IKEA is one of the first who also stopped business with Belarus. Read more

We could not offer safety and security to the people working in our supply chain – crossing the border, etc. it was just too risky. Then, on top of that, the consequences of various sanctions in general made it simply impossible to work anymore, “Inter IKEA’s chief business supply manager Henrik Elm told Reuters about Belarus.

Inter IKEA is responsible for the supply, while Ingka Group is a major global retailer with 17 stores in Russia and one distribution center. In the year to last August, Russia was the 10th-largest market for IKEA in retail sales of 1.6 billion euros (1.8 billion dollars), or 4% of total retail sales.

The company’s logo is seen outside the IKEA Group store in Saint-Herblain near Nantes, France, March 22, 2021. REUTERS / Stefan Mahe

The decision to suspend operations in Russia affects 15,000 employees, and Ingka Group’s retail operations manager Tolga Onju said in a joint interview with Elm that all staff will be paid in rubles for at least the next three months.

“The groups of companies will provide employment and income stability and provide support to them and their families in the region,” IKEA said.

IKEA manufactures chipboard and wood products at three sites in Russia and has about 50 direct suppliers in the country that produce 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’s products. Most goods made in Belarus, which is a pure supply market for IKEA, are sold in Russia and consist mainly of wood-based products and mattresses and sofas.

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

Elm said it was too early to say whether Inter IKEA would further raise prices for store owners as a result of the crisis in Ukraine.