IKEA Signals Tough Times For Furniture

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The furniture market continues to feel the pain. News out today suggests the agony extends worldwide, at all price levels. That's because low-priced furniture retailer IKEA is slashing even more jobs, as its sales continue to trend below expectations. According to the Associated Press:

(Founder Ingvar) Kamprad did not say exactly how many workers would be affected. In the past 10 months, Ikea has already slashed 5,000 jobs globally after sales dropped 7 percent below budget.


"We need to reduce personnel further mainly within production and logistics," he told Swedish daily Dagens Industri. "It's about adjusting to sales being far below budget and becoming more efficient."

A few months back, I spoke to a furniture industry analyst who explained how bad things were for that market in the U.S. With fewer people buying houses, fewer are buying furniture to fill up new homes. And those who might have upgraded their current décor are holding off. Few purchases can be put off as easily as furniture. You can always sit on your old sofa for another year or two.

But today's news makes clear that the furniture market's problems can be extended globally. IKEA is the very definition of a global furniture retailer. According to the IKEA website, their top five sales countries are:

Germany: 16%

USA: 10%

UK: 9%

France: 9%

Sweden: 7%

Clearly, a slow down in the U.S., while significant, would not single-handedly destroy their sales expectations. The global recession is affecting furniture substantially as an extremely cyclical industry.

IKEA is also kind of the Wal-mart of furniture retailers, in that its furniture comes at much lower prices than most of its competitors. That, again, shows that there's no flight to discount prices in the furniture market. Instead, no one is buying furniture at any price.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
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