A Swedish supplier of furniture to IKEA stores globally, Inter Ikea registered a 26 per cent decline in its annual operating profit in FY25, due to increased costs, primarily fueled by the impact of US tariffs.

The IKEA brand owner reported, their operating profit for the fiscal year that ended August 31 declined to €1.7 billion ($1.98 billion), from €2.3 billion the previous year. Their revenue also saw fell to €26.3 billion from €26.5 billion, following the company’s efforts to lower prices.

Inter IKEA noted, commodity prices and logistics costs had increased in the latter half of the fiscal year due to market uncertainties following the announcements of U.S. tariffs. Overall sales from IKEA stores across 63 global markets declilned for the second consecutive year to €44.6 billion ($52.01 billion). This occurred as the budget furniture retailer continued its strategy to cut prices and attract more customers. While IKEA has reduced prices overall, the higher U.S. tariffs forced the company to raise prices on certain products imported into the U.S. from factories in Europe and China.

To address these pressures, the company is looking toward local production. The Lithuanian furniture manufacturer SBA, a key IKEA supplier, recently opened its first US factory in North Carolina. This plant is manufacturing top-selling IKEA products like the Billy bookcases and Kallax shelving units.

Henrik Elm, Chief Financial Officer, Inter IKEA clarifies, the factory was planned before President Donald Trump began his tariff increases. However, the timing is very timely since that is also helping us to mitigate the effects of the tariffs on those top-selling products, he notes.

Despite the decline in profit, Inter IKEA saw a positive sign in sales volume. Wholesale sales volumes increased by around 6 per cent compared to the prior year, indicating that shoppers were responding to the lower prices by purchasing more items.