Ikea's Profit Margins Shrink in Spain Amid Price Reduction Strategy

Ikea, the renowned Swedish furniture giant, is currently navigating a challenging fiscal landscape in Spain. Recent reports indicate a decrease in both revenue and profitability for the fiscal year 2024. Despite a 2% increase in sales volume, the company's revenue dipped by 1% to €1.93 billion, as detailed in a recent press release (Ikea, 2025). This downturn is primarily attributed to Ikea's strategic decision to lower prices on its products and services, a move aimed at maintaining competitiveness and attracting customers. Javier García Ropero (2025) from El País is reporting that this marks the first revenue decline for Ikea in Spain since the disruption caused by the pandemic in 2020, when store closures significantly impacted sales.

Investing in Price Reductions

Over the past two fiscal years, Ikea has reportedly invested €103 million in reducing the prices of selected items. This commitment to affordability is set to continue into the coming year, although specific investment figures have not been disclosed. This strategy is particularly crucial in a market where consumer spending is closely monitored, and value for money is a key driver of purchasing decisions.

Growth Areas: Food and Online Sales

While overall revenue experienced a slight decrease, certain segments of Ikea's business in Spain are showing promising growth. The food and restaurant division, for instance, saw an 8.7% increase in sales, reaching €77.2 million. This indicates a successful diversification strategy, leveraging the appeal of in-store dining and food offerings. Additionally, Ikea's online business is flourishing, with a 4% increase in sales, amounting to €482.7 million, now representing 25% of total sales. This surge in online activity underscores the growing importance of e-commerce in Ikea's overall business model, aligning with broader trends in consumer behavior.

Impact on Profitability

The reduction in prices has inevitably impacted Ikea's profitability in the Spanish market. The Iberian subsidiary reported a net profit of €134 million, a 9.6% decrease compared to the previous year. Despite this decline, it remains the second-highest profit recorded by the company in the last decade. The company is actively managing its financial performance to balance affordability with profitability. According to Ediciones EL PAÍS S.L. (2025), Ikea is focusing on long-term sustainability and market share, even if it means accepting lower profit margins in the short term.

Investments in Stores and Sustainability

Ikea continues to invest heavily in its physical stores in Spain, allocating €38 million to improvements. Of this amount, €26.8 million was directed towards enhancing the customer experience, while €11.2 million was earmarked for sustainability projects and building improvements. This commitment to sustainability aligns with Ikea's global environmental goals and reflects a growing consumer demand for eco-friendly practices.

New Initiatives and Employee Welfare

In 2024, Ikea launched several new initiatives, including Ikea Home, a platform for professionals, and Ikea preowned, a second-hand marketplace that has attracted over 160,000 visitors. These initiatives demonstrate Ikea's commitment to innovation and circular economy principles. Furthermore, Ikea's workforce in Spain, comprising over 9,600 employees, experienced an average salary increase of 6.7%, reflecting the company's commitment to employee welfare and fair compensation.

Leadership Transition

The fiscal year 2024 also marked the end of Nurettin Acar's tenure as the General Manager of Ikea Spain. He has been replaced on an interim basis by the Chief Financial Officer, Fátima García de Viedma, while the company searches for a permanent successor. The company has stated that this change is part of a normal rotation process for general managers in different countries, as stated by Ikea's corporate communication team (Ikea, 2025).

Strategic Outlook

Looking ahead, Ikea is likely to continue focusing on price competitiveness, online growth, and sustainability initiatives in the Spanish market. The company's ability to adapt to changing consumer preferences and economic conditions will be crucial for its long-term success. While the recent decline in profitability is a concern, Ikea's investments in key areas such as technology, sustainability, and employee welfare position it for future growth and market leadership. The company is actively analyzing market trends and consumer feedback to refine its strategies and optimize its performance. It is expected that Ikea will provide more details on its future plans in the coming months, outlining its vision for the Spanish market and its commitment to providing affordable and sustainable home furnishing solutions.

The Spanish market is very important for Ikea and these changes are vital to keep on offering the best products and experience for their customers.