Ikea Faces Profit Decline Amid Tariff Impacts and Store Closures

Ikea has reported a significant decline in annual profits, attributing the drop to a strategy focused on price reductions and the effects of tariffs implemented during the Trump administration. The Swedish furniture giant announced that its profit after tax for the fiscal year ending in August 2025 fell by 32 per cent to €1.5 billion.

According to Henrik Elm, the Chief Financial Officer of the main holding company, the company experienced notable impacts from “big price decreases.” Following the COVID-19 pandemic, Ikea initially raised prices but later allocated between €2 billion and €3 billion to reduce prices by 10 per cent over the past two fiscal years. Elm stated, “To lower our prices to our customers is a part of our business model and business idea.”

Despite the drop in profit, Ikea’s overall sales for the fiscal year decreased by just 1 per cent to €44.6 billion. The company did see a 2.6 per cent increase in sales volume and a 1.9 per cent rise in the number of store visitors. In a statement, Inter Ikea confirmed that higher sourcing costs included expenses related to increased tariffs, which have been partially absorbed by the company.

In a related development, former President Donald Trump announced plans on social media to impose substantial tariffs on countries that do not produce furniture in the United States. He stated, “In order to make North Carolina, which has completely lost its furniture business to China, and other Countries, GREAT again…Details to follow!!!” The North American market is crucial for Ikea, accounting for approximately 10 per cent of its sales. The company operates 50 stores across the United States, including two in North Carolina.

Looking ahead, Elm expressed cautious optimism for 2026 and beyond, noting that Ikea is well-positioned to benefit from any future market changes. This comes as the company also announced store closures, including the Plan and Order Point in Greater Manchester, which is set to close on June 16, 2025.

The smaller format store, which specializes in planning services for kitchens, bedrooms, and living rooms, was part of Ikea’s experimental approach in the UK. The Aintree Plan and Order Point, which opened in December 2022, will also cease operations on the same date. Salma Azad, Ikea area manager, stated, “After careful evaluation, we’ve made the difficult decision to close the IKEA Plan and Order Point at Merseyway Shopping Centre.”

Azad emphasized the valuable insights gained during the store’s operation, which will inform future openings to better serve customers. As Ikea navigates the challenges posed by tariffs and changing consumer preferences, its ability to adapt will be critical to its ongoing success in a competitive market.