As Covid-19 has made life at home more important than ever, we accelerated our digital transformation, delivered solid sales and invested to become more affordable, accessible and sustainable.
The past year was dominated by the Covid-19 pandemic and its impact on people, communities and businesses, affecting our lives in ways most of us could never have imagined. For Ingka Group, it was first and foremost about securing the health and safety of our co-workers, customers and suppliers. But also, about making fast changes to accelerate our transformation to become an omnichannel retailer: improving our digital capabilities, repurposing our stores to fulfilment centres and increasing affordable services for safe pick-up and delivery. That way we could keep our business going, save jobs and meet our customers’ increasing online demand. At the same time, we continued to expand with new stores and city locations and new investments in innovative start-ups and accelerated our sustainability agenda. We want to be part of the solution to climate change, which is why we will continue to focus our future investments to ensure a cleaner, greener and more inclusive recovery from Covid-19.
With a big increase in online sales when stores closed, a strong comeback for store sales when they reopened, and continued focus on cost performance, we were able to reach EUR 37.4 billion in Ingka Group revenue, a decrease of just 4.8% compared to last year. This is a very good result considering that 75% of our stores, and a majority of our Ingka Centres meeting places and their tenant stores, were closed for an average of seven weeks.
I’m very proud of all colleagues who adapted so quickly to keep the business going and doing well. Their efforts made up for much of the drop in store sales, and also enabled us to continue to meet our customers’ increasing needs at home, at a time when home has been more important than ever. Many of the services, like drive-through and click & collect, continue to be meaningful as they offer customers safe and convenient ways to shop no matter if stores are open or closed. This also makes us more resilient and better prepared for FY21, as the pandemic is still ongoing, and we will be able to safely handle the new normal for the foreseeable future.
Sustainability is our new business model
We are convinced that it’s good business to be a good business – that healthy and sustainable living can be affordable, attractive and accessible for the many people. As one of the biggest brands in the world, we have both the responsibility, and a unique opportunity, to lead change through our operations and ecosystem. Because every day, we interact with millions of co-workers and consumers all over the world.
By becoming circular and climate positive by 2030, we make sure that we as a business contribute to a net-zero economy. By offering sustainable products like home solar, which makes renewable energy accessible for more people, our new plant-based ball with 96% less carbon footprint than the meatball, and circular services like furniture rentals and buyback programs, we are making sustainable choices affordable for more people than ever before. Also, by 2030, all IKEA products will be made from renewable or recycled materials and designed from the very beginning to be repurposed, repaired, reused, resold or recycled. This will help customers choose more sustainable materials, eat more sustainably, repair and maintain furniture, and save energy. And that’s good business, for us, for our customers and for the planet.
We are built for purpose
It’s long been Ingka Group’s financial approach to earn the money before we spend it and not rely on external funding. With 77 years of growth and investments, we have built up a strong financial position which in combination with a unique ownership structure – being owned by a foundation with a charitable purpose – allows us to be purpose-driven in our decisions and take a long-term approach, thinking in “generations” rather than “quarters”, with the room to act in times of crisis.
Over the course of the pandemic, we have also experienced first-hand how our financial strength and resilience enabled us to navigate this crisis. It allowed us to grant EUR 26 million in emergency relief to support communities. And to provide income stability for our co-workers, including extended parental leave for parents with kids who had to stay home from school. We were also able to return the government stimulus we had received to cover co-worker’s wages, support our suppliers and partners with faster payments and loans, and Ingka Centres waived rents for 2,000 tenants.
Investing to transform
In FY20, we continued to make major investments in store fulfilment and digital transformation, launching the shoppable IKEA app in nine markets and ecommerce in all our markets, and improving digital infrastructure across the board. We also invested in innovative companies that can speed up our business transformation in strategic areas like retail services, logistics, digital and circularity. We acquired Geomagical Labs, a smartphone AI that lets you visualise your home in 3D with IKEA furniture; made investments in Mover, a logistics optimisation solution that makes last-mile deliveries more sustainable and affordable; and Winnow, an AI that helps to reduce food waste in our restaurants.
We opened 26 new IKEA locations in FY20, including five new traditional IKEA stores in South Korea and China, and to support a fast execution of our big city expansion, we opened 21 new IKEA store formats in cities like Shanghai, Moscow and Tokyo. Additionally, we launched e-commerce in Ukraine as a first step into the new market. And we also made real estate investments in city centres, with Ingka Investments acquiring a major building on Rue Rivoli in Paris and Ingka Centres acquiring inner city malls in downtown London and, as we announced in early FY21, San Francisco, both of which will be transformed into sustainable, community-driven meeting places.
Accelerated sustainability investments
We have continued to invest in forestland and new wind farms and solar parks enabling us to exceed our 2020 goal to produce as much renewable energy as the energy we consume in our operations. In September 2020, we announced that we are investing EUR 600 million more to reach the IKEA ambition to become people and planet positive by 2030, aimed to speed up the transition to a net-zero carbon economy. This increases our overall investments into sustainability to EUR 3.8 billion since 2009.
Continued transformation in FY21
FY20 has been a tough and remarkable year for all of us, not the least on a human level. I’m humbled to see how much the organisation has been able to deliver. The solid sales performance, our response to support people and communities around us, how we came together around our values to change and improve our business in order to better meet the needs of our customers. It really says something about the agility and entrepreneurship of our company.
Looking forward to FY21, we are even more inspired to keep investing to increase our presence in every city and market where we operate, speed up our omnichannel transformation and accelerate our sustainability agenda to become climate positive by 2030. By offering sustainable solutions that the many people can afford, we will continue to make sustainable choices available for the many, not just a luxury for the few. The pandemic has made life at home more important than ever, and our job is to deliver to our vision to create a better everyday life for the many people. What a wonderful job. What a glorious future!
Deputy CEO and CFO Ingka Group